Brunson, Enumerating Environmental Exemptions in Section 501(c)(3)
The United States has tens of thousands of environmental charities. These charities operate to “preserve, protect, and improve the environment.” Roughly half of the revenue of environmental charities directly from the public. These public donations depend, at least in part, on the organizations’ tax-exempt status, which allows donors to deduct their donations for tax purposes. Because donors take into account the after-tax cost of their donations, an environmental charity’s tax exemption increases the amount of donations it receives in comparison with a similar environmental organization that is not tax-exempt.
The tax-exempt status of environmental organizations is tenuous and contingent, though. The Internal Revenue Code lists seven tax-exempt purposes, none of which is environmental. Environmental organizations’ exemption arrives not through legislation but through administrative action—the IRS announced that environmental organizations fit under the exempt umbrella of “charitable” organizations, a pre-existing statutory category of qualifying tax-exempt organizations.
In addition, the value of the tax law is not limited to its substance: tax law also serves an expressive function. In its expressive function, it can encourage and discourage certain behaviors. It can (implicitly or explicitly) put the weight of government approbation behind certain organizations and classes of organizations.
Tax exemption may, in fact, be more powerfully expressive than much of tax law. While much of the tax law opaque—or even scary—to the general public, section 501(c)(3) is salient, and arguably hypersalient, to the public. Climate change has evolved into a critical and pressing issue.
That organizations that work to reduce climate change can avoid taxes and receive tax-deductible donations is good. But if the government truly wants to both signal its support for efforts to preserve the environment and ensure that environmental organizations continue to qualify for tax exemption, it must amend section 501(c)(3) to expressly allow environmental organizations to qualify. Moreover, because organizations already qualify for exemption, it also offers the government a low-cost path toward disseminating its support for environmental priorities.
Lloyd Mayer