The Giving Game
The saga of philanthropy still needs its history.
May 14, 2012, Vol. 17, No. 33 • By MARTIN MORSE WOOSTER
In Jackson v. Phillips, a Massachusetts state court ruled that the parts of Jackson’s estate designed to help free slaves were a valid charity but the parts designed to aid women were not. The reasoning was that Jackson had said that his antislavery organization would produce books, pamphlets, and newspapers, but his feminist organization would only lobby for suffrage and the right of women to own property. The former, in the court’s eyes, was an educational mission; the latter, a noncharitable attempt to change the Constitution.
For the next century, courts routinely stripped tax exemptions from organizations that they thought were primarily trying to change laws. Charities kept coming up with increasingly vague charters that had some “educational” feature as a way of disguising their lobbying and keeping their tax exemptions. The Revenue Act of 1934 seemed to settle the matter by saying that organizations that lobbied to change laws couldn’t receive tax-exempt contributions. Zunz shows that this law was passed to punish the National Economy League, a government watchdog group that wanted to reduce pensions for veterans who weren’t disabled.
The issue took another half century to settle. In 1973, Taxation With Representation, a liberal good-government group that lobbied to eliminate what it saw as corporate tax loopholes, was denied 501(c)(3) status because it lobbied. Four years later, the group decided to sue the IRS, and the case eventually reached the Supreme Court, which decided in Regan v. Taxation With Representation (1983) that the group was wrongly denied its exemption. As a result, groups accredited as 501(c)(3)s can set up allied 501(c)(4)s to engage in political issues—and the 501(c)(4) can be in the same building as, or even next door to, the 501(c)(3). (So when liberals rail against the activities of Karl Rove and Norm Coleman they should admit that Rove’s and Coleman’s organizations can do what they do because of a precedent the left created.)
If Zunz’s treatment of other philanthropic issues were as systematic as his analysis of tax exemptions, Philanthropy in America would be more interesting. But Zunz is a dabbler who flits from topic to topic: a little about international organizations, a little more about the efforts of foundations in the 1970s to police themselves after some fierce congressional investigations of nonprofits in the 1960s. Given the vastness of Zunz’s subject, it’s understandable that he had to be selective, but the stories he omits are often more important than the ones he tells. He spends less than a page, for example, discussing the question of whether foundations should live in perpetuity or be term-limited, even though this debate has been continuing since the first large American foundations were created a century ago.
There’s still a need for an authoritative history of American philanthropy.
Martin Morse Wooster is a senior fellow at the Capital Research Center and the author, most recently, of Great Philanthropic Mistakes.