State and federal tax policy toward nonprofit organizations

Abstract

State and federal tax policy in the United States generally favors nonprofit organizations, and particularly nonprofits classified as 501(c)3 nonprofit charities. This favorable tax treatment comes from two types of tax policies. First, nonprofits are exempt from paying a variety of state and federal taxes. Second, individuals are encouraged to donate to nonprofit charities through favorable policies in the federal income tax, state income taxes, and the inheritance tax. This paper presents some basic material on the tax treatment of nonprofit organizations, and then examines what we know and what we do not know about state and federal tax policy toward nonprofit organizations.

Can tax regulations moderate revenue diversification and reduce financial distress in nonprofit organizations?

“…Previous literature has focused on tax deductions and benefits (Yetman & Yetman, 2013), tax rates (Alm & Teles, 2018) and the taxpayer (DiRusso & Foster, 2016) as potential conditioning factors in the volume of charitable giving. However, we find that two issues have been overlooked: (a) lack of harmonization in taxes; and (b) requisites for acceding to a singular tax regime.…”