Oregon Law Review : Vol. 86 No. 3, p. 865-894 : Redefining What It Means to Be Charitable: Raising the Bar with a Public Benefit Requirement
This Comment seeks to explain how a public benefit requirement will improve the charitable sector in America. Part I explains what it means to be “charitable” in American tax law, and provides a general idea of what an organization must do to be exempt from federal taxes under the Internal Revenue Code (“I.R.C.”) § 501(c)(3). Part II describes the substantial benefits of being classified as a § 501(c)(3) organization. Additionally, possible rationales for preferential treatment of charitable organizations in the tax code are explored. Part III illustrates the need to reform current charity law, and explores what that restructuring might look like by examining reform occurring at the state level. It also examines charity reform recently passed in England and Wales in the Charities Act, which potentially offers a creative solution to reforming the American charitable sector. Part IV explores some of the concerns of government officials at the federal level regarding the charitable sector by summarizing a recent hearing before the House Committee on Ways and Means. Finally, Part V argues for the adoption of a public benefit requirement similar to the one in the Charities Act. Essentially, a public benefit requirement has already been adopted in several states, at least regarding the regulation of nonprofit hospitals. The success of these states in formulating public benefit requirements is evidence that doing the same at the federal level will not be unduly burdensome.