The Public Policy Doctrine in China and America
In the United States we know that to be exempt under IRC 501(c)(3), an organization’s activities may not violate clearly defined, fundamental, strong, established public policy. The primary criticism of this notion, or at least one primary criticism, is best articulated in contract jurisprudence, to wit: “public policy . . . is a very unruly horse, and when once you get astride it you never know where it will carry you. It may lead you from the sound law. It is never argued at all but when other points fail.” I think the speaker thinks of “public policy” as something akin to “public whim,” where government is the public. We are government, after all. Government is not some extra-society group handing down law. We are government. Anyway, I wrote an article a long time ago about Chinese nonprofits and I remember that under the law as it existed then, all nonprofits had to have a government sponsor, a designated bureaucrat maybe, whose job it was to ensure that the nonprofit operated in a manner entirely consistent with public policy. My ethnocentrism wants me to suggest that there is a difference between a mandate to operate consistently with public policy at all times, and a mandate not to ever violate public policy. It is possible, though, that the difference is merely semantic and maybe our democracy isn’t as liberal as Powell envisioned when he argued that “public policy” is a means to impose government orthodoxy. From a paper I am working on:
Exemption allows groups without a voting majority to follow an alternative priority with which public goods or services are pursued. Where government might think it unimportant to focus on environmental protection or endangered species, grassroots organizations might differ and direct their financial and human resources exclusively to preservation of wetlands or bald eagles. It is hard to know whether Powell’s view represents a diversion from Burger’s public benefit rationale or just a clarification. I tend to think that Powell is asserting the right of individuals to differ with the government as to public priorities and the methods by which to accomplish those priorities, but not to define for themselves, without any limitation, what is intended by “public benefit.” Even Powell agrees that government may define those things that are so far out of bounds that they are not conducive to the public good. “In this case I agree with the Court that Congress has determined that the policy against racial discrimination in education should override the countervailing interest in permitting unorthodox private behavior.” Id. at 610. (Powell, J. concurring).
Perhaps the difference between the Chinese and U.S. public policy doctrines are matters of degree. Our public policy doctrine regulates around the margins, theirs in the main.
Prior to the enactment of the Charity Law, the literature discussing the pre-2016 regulatory framework showed that the crucial problem underlying the earlier regulation lay in the government’s strict, extensive control over the charitable sector. Embedded within China’s distinctive social, economic, and political conditions are numerous “restrictive and repressive measures”9 through which the State regulates the charitable sector. In the words of Rebecca Lee,“[t]o ensure that it remained a key stakeholder in the charitable sector, the Chinese government retained strong controls over the [charitable] sector through various mechanisms and developed a charitable sector that would collaborate with it but never challenge its legitimacy.” Rather than being autonomous and independent like their Western counterparts, Chinese charities13 are more accurately described as “instrument[s] of state social control.”
If this topic tickles your fancy, here is an abstract from a recently posted paper:
With the 2016 Charity Law, Chinese legislators created a public-private hybrid model for the governance of charitable trusts. By endowing private actors with greater rights in the creation and management of charitable trusts, this hybrid model demonstrates the State’s intention of changing the functioning of the charitable trust sector from complete dependence on the State to a partnership. However, embedded in China’s particular institutional environment, the partnership relationship still bears the mark of strict government control, which is secured by granting extensive powers to regulators. This article analyzes the newly established regulatory framework for charitable trusts and outlines how regulators exercise their power in practice. The findings show that the tradition of regulators being subject to intense administrative pressures remains unchanged and that political concerns permeate every aspect of the regulation of charitable trusts.
darryll jones