A Prayer for Better Policy: Redefining Philanthropic Tax Policy in the 21st Century
Opportunities for improvements exist to foster a shift towards incentivizing sustainability and skill-building, steering away from patterns of philanthropic wastefulness.
The Internal Revenue Code’s Section 501(c) and Section 170 are core federal laws promoting charitable giving. As a result, deductions and credits, also known as “tax write-offs” have been largely known methods to incentivize monetary giving toward social good. Considering political theology, the lens of acknowledging how spiritual beliefs influence social movements that create policy, both Old and New Testament Bible verses promote charitable giving. Within the examined federal tax codes lies a shared political theology emphasizing care for the vulnerable. Yet, opportunities for improvements exist to foster a shift towards incentivizing sustainability and skill-building, steering away from patterns of wastefulness and promoting self-sufficiency rather than dependence on charity.
Analysis of Section 501(c)
The Internal Revenue Code (IRC) Section 501(c), lays out the different types of organizations in the U.S. that can enjoy tax-exempt status. When an organization falls into one of these categories, it means they're not required to pay federal income tax. Focusing on a crucial subsection for charitable giving, 501(c)(3) sets the rules for organizations aiming to be tax-exempt charities. Whether involved in religious, charitable, scientific, literary, or educational pursuits, meeting these criteria opens the door to tax-exempt status. Notably, tax-exempt status means that qualifying organizations under Section 501(c)(3) don't have to pay federal income tax, and this status can be a game-changer for donors.
When individuals contribute to these tax-exempt charitable entities, they often enjoy the added benefit of deducting those donations from their taxable income, providing an incentive for philanthropy while reducing the donor's tax liability. It's a win-win for those supporting a good cause. This section of the Internal Revenue Code incentivizes donors to enact principles of The Lord’s Prayer, bringing the kingdom from heaven on earth through their donations (Matt 6:10).
Exploration of Section 170
The Internal Revenue Code Section 170 provides rules for the deduction of charitable contributions by individual taxpayers. Subsection 170(c)(2)(B) defines a charitable contribution. It also outlines the criteria for determining the deductible amount of charitable donations and the types of organizations eligible for contributions, aligning with organizations described in Section 501(c)(3).
A Prayer for a Points System
While Sections 501(c)(3) and 170(c)(2)(B) have effectively incentivized social good through tax deductions and credits, a critical examination reveals areas for enhancement to align with contemporary philanthropic needs. Reform is needed.
The current framework lacks sufficient encouragement for crucial factors essential in 21st-century philanthropy. A proposed reform involves augmenting deductions for charitable contributions to organizations that prioritize:
Empowering Skill-Building Over Dependency: The current system doesn't adequately distinguish between organizations fostering true self-sufficiency through skill-building initiatives and those perpetuating dependence on charity. To address this, a revamped structure could implement a points system. Organizations demonstrating a commitment to empowering skill-building would earn higher points, translating into increased deduction percentages. Isaiah 1:17 calls us to “rescue the oppressed”, which we cannot do if we are continuously keeping them in a state of dependence rather than self-sufficiency through skill building (NRSV).
Engaging in Green Practices for Sustainable Impact: The environmental impact of charitable organizations is a growing concern in an era focused on sustainability. Existing tax codes fall short in promoting eco-friendly practices. Introducing a points-based deduction system would provide incentives for organizations to adopt green initiatives and reduce their carbon footprint. The higher an organization's commitment to environmentally conscious practices, the greater the potential deduction. This promotion of eco-friendly strategies also aligns with the Genesis 2:15 command from God to humans to steward the Earth.
Over the past half-century, Africa has been the recipient of an extensive $1 trillion in benevolent aid; however, the outcomes have been far from the anticipated positive trajectory. Contrary to expectations, per capita income has declined, life expectancy has plateaued, and adult literacy rates have experienced a decline (Lupton, 2011). In response to these disabling challenges, proposing a nuanced reform becomes imperative.
The implementation of a points system, where organizations garner deductions contingent upon a blend of skill-building initiatives and environmentally conscious practices, presents a compassionate and eco-friendly strategy for cultivating authentic social impact. This reform not only ensures a harmonious alignment of donors' contributions with their values but also propels charitable entities toward a comprehensive and sustainable operational model. This transformative shift aims to contribute meaningfully to the realization of the kingdom-come principles embedded in The Lord’s Prayer (Matt 6:10).
To address concerns that qualifying 501(c)(3) organizations, not currently immersed in sustainable practices, may face depletion of funds due to the introduced incentives, a proactive solution can be implemented. The development of a toolkit, strategically disseminated to qualifying organizations and those in the process of applying for their 501(c)(3) qualification, serves as a comprehensive resource. This toolkit not only imparts crucial information on sustainable practices but also mitigates potential financial pitfalls by ensuring a balanced approach.
In fostering a collaborative effort, the toolkit can be augmented by free consulting services facilitated through a partnership between key entities such as the Catalog of Federal Domestic Assistance (CFDA), U.S. Small Business Administration (SBA), National Council of Nonprofits, and the Internal Revenue Service. This collective initiative endeavors to empower organizations with the knowledge and support needed to navigate the transition toward sustainability seamlessly, thereby ensuring the enduring impact of philanthropic efforts.
Political Theology
In the realm of sustainable philanthropy, numerous theologians and social activists advocate for a paradigm shift, envisioning the realization of the kingdom from heaven on Earth. One notable figure in this discourse is Jonathan Wilson-Hartgrove, renowned author of "God’s Economy: Redefining the Health & Wealth Gospel".
Wilson-Hartgrove contends that "God’s economy is an interruption of business as usual," urging philanthropy to innovate and harness the vast potential of capitalism to move beyond dependence on charity towards strategic, sustainable empowerment (2010).
He challenges the traditional norms governing 501(c)(3) and missionary organizations, suggesting that these entities need to redefine their approaches to problem-solving. Wilson-Hartgrove criticizes decision-makers for prioritizing the comfort of success over the wisdom embedded in God’s economy of abundance (2010). Embracing the concept of "economic friendship," his political theology emphasizes community-sourced and community-sustaining solutions that offer sustained support to the poor and disadvantaged (2010).
Dorothy Day, a Catholic activist and co-founder of the Catholic Worker Movement, emerged as a radical force within the Catholic community. Much like Dr. Martin Luther King Jr.'s commitment to non-violence during the Civil Rights Era, another political theology-inspired movement, the Catholic Worker Movement blended direct aid for the poor with nonviolent direct action. Day's advocacy suggests that she would endorse philanthropic policy updates emphasizing skill empowerment, particularly in areas related to housing and financial stability. Her commitment to selling possessions to aid the poor exemplifies a literal embodiment of the commandment in Luke 12:33. Day's strategic, nonviolent approaches to supporting the poor align with the recommended improvements in philanthropic policies.
Reinhold Niebuhr, an esteemed ethics scholar and theologian, directed his criticisms toward systems contributing to the plight of the poor. Sharing a commitment to pacifism, his condemnation of working-class labor issues found inspiration in biblical themes, breaking the systemic chains of injustice referred to in Isaiah 58:6-7.
Conclusion
The Internal Revenue Code has opened significant avenues for charitable organizations to contribute to social good, creating a framework that encourages donors to participate actively.
Enacting the proposed modifications in sections 501(c)(3) and 170(c)(2)(B) align with a vision to “empower us to disarm the power of money and set it free to build the beloved community that God wants everyone to enjoy” (Wilson-Hartgrove 2010).
However, when we consider how the current law operates, there is a need to delve into how it may discourage resilience-focused philanthropy.
The current structure may inadvertently create incentives that prioritize short-term relief efforts over long-term, sustainable solutions. This can be seen as a deviation from biblical principles of generosity and stewardship, as the emphasis on immediate impact may overshadow the importance of cultivating enduring solutions to systemic issues. In examining Section 501(c)(3), we must assess its alignment with the biblical call to steward resources wisely and generously, to bring the kingdom from heaven on Earth, as requested in the Lord’s Prayer.
1 Timothy 6:18-19 guides us to 'do good, to be rich in good deeds, and to be generous and willing to share.'
This ethos calls for philanthropic endeavors that not only address immediate needs but also contribute to building lasting resilience within communities. The encouragement of stewardship and generosity, as outlined in biblical principles, should be reflected in the operational dynamics of organizations qualifying under Section 501(c)(3).
Translating this philosophy into policy involves engaging less fortunate populations in solution-making and deployment while holding 501(c)(3) qualifying organizations accountable for sustainable operational practices that benefit both people and the planet they impact. A points system, toolkits, and collaborative efforts between federal organizations can empower these Internal Revenue Code policies to align with 21st-century standards of innovative sustainability, rooted in political theological thought.
References:
Internal Revenue Code. 26 USC 170: Charitable, etc., contributions and gifts
Internal Revenue Code. 26 USC 501: Exemption from tax on corporations, certain trusts, etc.
Jonathan, Wilson-Hartgrove. God’s Economy: Redefining the Health & Wealth Gospel. Zondervan; Whispersync for Voice-ready, 2010.
Lupton, Robert D. 2011. Toxic Charity: How Churches and Charities Hurt Those They Help (and How to Reverse It). New York, NY, HarperOne.
Originally written November 20, 2023 for Social Justice, Public Policy and Political Theology taught by Professor Raymond Pierce.