41 Tax L. Rev. 693 (1985-1986)
From Big Mama Rag to National Geographic: The Controversy Regarding Exemptions for Educational Publications

handle is hein.journals/taxlr41 and id is 703 raw text is: From Big Mama Rag to National
Geographic: The Controversy Regarding
Exemptions for Educational Publications
DANIEL SHAVIRO *
Introduction
Among the many tax preferences provided under the Code, few are
less controversial in principle, or more controversial in application,
than the exemption from taxation provided to organizations described in
section 501 (c) (3). Under this provision, organizations that are organ-
ized and operated exclusively for charitable, educational, religious,
literary, or certain other purposes, and which do not engage in political
activities or lobbying or permit any of their net earnings to inure to the
benefit of any individual, can qualify as tax-exempt organizations.' In
general, organizations that qualify under section 501 (c) (3) not only are
exempted from paying tax on their earnings, but are entitled to receive
contributions that qualify for the deduction for charitable contributions.-
Section 501(c) (3) is controversial because of the difficulty of defin-
ing the grounds on which exemptions should be granted. An overly
broad definition would permit tax avoidance, or the receipt of an indirect
federal subsidy, by taxpayers who do not truly or sufficiently engage in the
* DANIEL SHAVIRO (A.B., 1978, Princeton University; J.D., Yale Law School,
1981) is a legislation attorney with the staff of the Joint Committee on Taxation.
The author wishes to thank RiCHARD B. RUGE, a legislation counsel with the staff
of the Joint Committee on Taxation.
I In full, § 501(c) (3) provides that the list of organizations qualifying as
exempt under § 501(a) shall include:
Corporations, and any community chest, fund, or foundation, organized and
operated exclusively for religious, charitable, scientific, testing for public
safety, literary, or educational purposes, or to foster national or international
amateur sports competition (but only if no part of its activities involve the
provision of athletic facilities or equipment), or for the prevention of cruelty
to children or animals, no part of the net earnings of which inures to the
benefit of any private shareholder or individual, no substantial part of the
activities of which is carrying on propaganda, or otherwise attempting, to
influence legislation (except as otherwise provided in subsection (h)), and
which does not participate in, or intervene in (including the publishing or dis-
tributing of statements), any political campaign on behalf of any candidate
for public office.
2 I.R.C. § 170(c) (2) (B). In addition, exempt organizations can qualify for
nontax benefits such as reduced postal rates. See 39 U.S.C. § 3626 (1982).
693

Imaged with the Permission of N.Y.U. Tax Law Review

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