Contents

1C H A P T E R O N ECharitable Giving Law:Basic Concepts§ 1.1 Introduction to theCharitable Deduction 3§1.2 Defining Tax-ExemptOrganizations 4§ 1.3 Principles of CharitableOrganizations LawPhilosophy 7(a) Public Policy andNational Heritage 9(b) Other Rationales 16(c) Freedom of Association 18§ 1.4 Statistical Profileof Charitable Sector 19§ 1.5 Categories of Tax-ExemptOrganizations 25The purpose of this book is to summarize and analyze the law of charitable giving.For the most part, this law consists of federal tax law requirements, althoughstate law can be implicated. The law of charitable giving frequently interrelateswith the laws concerning tax-exempt status and public charity/private foundationclassification of charitable organizations.§ 1.1 INTRODUCTION TO THE CHARITABLE DEDUCTIONThe charitable contribution is the subject of extensive law. On the face of it, a charitablegift is a rather simple matter, requiring merely a gift and a charitable recipient.Though these elements are crucial (and are discussed throughout these pages),they by no means constitute the whole of the subject. Far more is involved indetermining the availability and amount of the charitable contribution deduction.There are, in fact, several charitable contribution deductions in Americanlaw, including three at the federal level: one for the income tax, one for the estatetax, and one for the gift tax. Most states have at least one form of charitablededuction, as do many counties and cities.The principal charitable contribution deduction is the one that is part of thefederal income tax system. A charitable contribution paid during a tax year generallyis allowable as a deduction in computing taxable income for federal income taxpurposes. This deduction is allowable irrespective of either the method of accountingemployed or the date on which the contribution may have been pledged. 3