Contents

CHARITABLE GIVING LAW: BASIC CONCEPTSThis phenomenon has been described as “market failure” as far as for-profitorganizations are concerned, in that, in certain circumstances, the market isunable to police the producers by means of ordinary contractual devices. 78 This,in turn, has been described as “contract failure,” which occurs when consumers“may be incapable of accurately evaluating the goods promised or delivered”and “market competition may well provide insufficient discipline for a profitseekingproducer.” 79 Hence, according to this theory, the consuming publicselects the nonprofit organization, which operates without the profit motive andoffers the consumer the “trust element” that the for-profit organizations cannotalways provide.Although the economic demand-side theory is fascinating and undoubtedlycontains much truth, it probably overstates the aspect of consumer demand anddownplays historical realities, tax considerations, and human frailties. The nonprofitorganization antedates the for-profit corporation, and many of today’stax-exempt organizations may be nonprofit because their forebears started outas such. In addition, the forces of pluralism of institutions and organizationscontinue to shape much of the contemporary independent sector.(c) Freedom of AssociationTax exemption for nonprofit membership organizations may be viewed as amanifestation of the constitutionally protected right of association accorded themembers of these organizations. There are two types of freedom of association.One type—termed the freedom of intimate association—is the traditional type ofprotected association derived from the right of personal liberty. The other type—the freedom of expressive association—is a function of the right of free speech protectedby the First Amendment to the U.S. Constitution.By application of the doctrine of freedom of intimate association, the formationand preservation of certain types of highly personal relationships areafforded a substantial measure of sanctuary from unjustified interference by government.80 These personal bonds are considered to foster diversity and advancepersonal liberty. 81 In assessing the extent of constraints on the authority of governmentto interfere with this freedom, a court must make a determination ofwhere the objective characteristics of the relationship, which is created when anindividual enters into a particular association, are located on a spectrum from themost intimate to the most attenuated of personal relationships. 82 Relevant factorsinclude size, purpose, policies, selectivity, and congeniality. 8378 Id. at 845.79 Id. at 843.80 Pierce v. Society of Sisters, 268 U.S. 510 (1925); Meyer v. Nebraska, 262 U.S. 390 (1923).81 Zablocki v. Redhail, 434 U.S. 374 (1978); Quilloin v. Walcott, 434 U.S. 246 (1978); Smith v. Organization ofFoster Families, 431 U.S. 816 (1977); Carey v. Population Serv. Int’l., 431 U.S. 678 (1977); Moore v. EastCleveland, 431 U.S. 494 (1977); Cleveland Bd. of Educ. v. LaFleur, 414 U.S. 632 (1974); Wisconsin v. Yoder,406 U.S. 205 (1973); Stanley v. Illinois, 405 U.S. 645 (1972); Stanley v. Georgia, 394 U.S. 557 (1969); Griswoldv. Connecticut, 381 U.S. 479 (1965); Olmstead v. United States, 277 U.S. 438 (1928).82 Runyon v. McCrary, 427 U.S. 160 (1976).83 Roberts v. United States Jaycees, 468 U.S. 609 (1984). 18