Article on A Nominal Credit: Why Donor Recognition Should Not Limit the Deductibility of Section 170 Charitable Contributions

Benjamin J. Imdieke recently wrote an Article entitled, A Nominal Credit: Why Donor Recognition Should Not Limit the Deductibility of Section 170 Charitable Contributions, 42 ACTEC Law Journal 119 (2016). Provided below is an abstract of the Article:

Part One explores whether law and policy support limiting a recognized donor’s charitable deduction and concludes that they do not. Part Two explores the proposals of two legals scholars, Professors William Drennan and Linda Sugin, who argue that donor recognition should limit deductibility. Professor Drennan argues that the fair market value of donor recognition should affect deductibility and Professor Sugin argues that the duration of recognition should affect it. Part Three presents the author’s disagreement with the arguments. First, as Professor Evelyn Brody has recognized, property, and not contract, is the proper legal doctrine to apply. Second, a reduced deduction is ill-fitting with the legal and theoretical justifications that underlie the charitable gift deduction, especially Professor Henry Hansmann’s capital formation theory. Third, the donor recognition question is analogous to corporate sponsorship wherein charities must pay unrelated business income tax on corporate advertising revenue, but not when charities merely recognize their corporate sponsors. Fourth, the way private foundations and donor advised funds recognize their donors, and the fact that public entities recognize non-donors, illustrate how changing the current regime would probably not curb perceived abuses, but would likely create perverse outcomes.