Friday, December 2, 2005
The United States Supreme Court recently has decided several difficult and divisive constitutional issues deeply and broadly affecting numerous charitable and educational institutions. The supposed clarity in the law effected by these decisions is undermined by an elusive doctrine of federal income tax law governing tax-exempt charitable organizations. This public policy doctrine may deprive an organization of tremendous tax benefits, notwithstanding that its activities and legal, and perhaps even when such activities are otherwise constitutionally protected. This article discusses the judicial foundation of the doctrine and its subsequent administrative development, and explains the doctrine's myriad and complex administrative, constitutional, and other problems. This article then suggests a contraction and refinement of the doctrine for adoption by the courts and partial enactment by Congress.