The Big Questions of Philanthropy Law in a Delightful Snack-Size Portion

Ray D. Madoff, What Leona Helmsley Can Teach Us About the Charitable Deduction, 85 Chi.-Kent  L. Rev. 957 (2010).

Should charitable trusts be perpetual and should such philanthropy benefit from generous tax subsidies? Professor Ray D. Madoff of Boston College Law School addresses what are perhaps the most fundamental questions of charitable trust law in a surprisingly accessible and engaging article. The article reads less like legal scholarship and more like a good story, perhaps owing to the fact that it relies upon her book, Immortality and the Law (Yale Univ. Press 2010).

Professor Madoff opens with a character sketch of Leona Helmsly, the “queen of mean,” who harnessed the tax benefits supporting philanthropy to fund an eight-billion-dollar trust for the benefit of dogs (in addition to funding a comfortable twelve-million-dollar fund for her own aggressive terrier). She explains the role of tax expenditures in supporting such donations and invites her reader to question whether the benefits from such a system are worth its costs.

The article explains not only the current rules benefiting perpetual charitable trusts, but the evolution of those rules and the historical limitations and restrictions that were the norm until fairly recently. Professor Madoff illuminates how some degree of mistrust and desire to control or limit philanthropic trusts shadowed perpetual charitable trusts for quite some time, making the substantial liberality they enjoy today no longer something one should take for granted.

After laying this foundation (no pun intended), Professor Madoff takes on what are arguably the two biggest policy questions in the law of philanthropy: first, should charity benefit from tax subsidies, and second, should charities be perpetual? Many other scholars, of course, have debated and will debate these central queries in substantial detail. Much of this scholarship is heady analysis with a level of sophistication and complexity that it invites discussion from experts well-versed in the intricacies of the third sector and tax policy. What Professor Madoff does instead is empower the novice to join the conversation.

The article explains, concisely and clearly, how the income tax charitable deduction and the estate tax charitable deduction function as tax expenditures. Using specific examples with numbers and simple math, she shows how the federal tax system works largely like a matching grant program for wealthy taxpayers. Professor Madoff next highlights how the preferences of wealthy Americans, particularly their fondness for private foundations and educational institutions, can skew governmental funding of charity from what may be mainstream priorities.

Having challenged the tax benefits charities enjoy, Professor Madoff takes on the other 800-pound gorilla of philanthropy: perpetuity. Again using simple math and straightforward examples, Professor Madoff demonstrates how perpetual private foundations doling out minimal contributions throughout time (while bleeding administrative costs) fail to address societal needs the way immediate and direct contributions would. She prompts the reader to consider how the law might be improved to provide better support for the true goals of philanthropy, rather than the hubris or whims of individual donors.

What is novel about Professor Madoff’s article is not its content, but its delivery. Its value lies in its potential to engage law students or even novices to philanthropy with the key questions of the genre. Law students in particular seem to view charitable trusts with a bit of a rosy glow, and this tasty morsel of an article may provoke them to challenge those assumptions. (I may assign it myself as required or recommended reading in my Wills class in connection with our unit on charitable trusts.) The article also has potential to inspire undergraduates or those in non-legal disciplines to engage with the major policy questions of philanthropy law. Even for a reader without significant grounding in charitable trust law, this is an article one can access, digest, and even like lots.