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Kristine S. Knaplund, Charity for the Death Tax? The Impact of Legislation on Charitable Bequests, 45 Gonz. L. Rev. 713 (2010), available at SSRN.

How sturdy is the charitable impulse in the face of federal and state regulation, and would the removal of an estate tax benefit for charitable bequests smother it?  Professor Kristine S. Knaplund of Pepperdine explores this conundrum from a creative and unique perspective in her new article.

The article is a story of American legal history and the persistent charitable drive.  Professor Knaplund points out that charitable bequests have taken their legal knocks before, and still emerged strong.  Her article guides us through a variety of legislative acts, both state and federal, that altered restrictions or incentives to make charitable gifts.  Throughout the article, Professor Knaplund skillfully juxtaposes the federal regimes (largely tax acts) with contemporaneous state law developments.

On the federal side, she leads us through critical tax acts in America’s early history, including the Stamp Act of 1797, the Tax Act of 1862, and the 1898 War Revenue Act (and the first federal exemption for charitable bequests).  Meanwhile, she explains the development of state mortmain statutes and the early state law confusion relating to whether charitable trusts were authorized by law.  She also tackles the development of state law doctrine throughout the nineteenth century, including limitations on amounts testators could leave to charity, restrictions on property holdings by churches or other nonprofits, and state inheritance taxes.

Before turning to modern law, Professor Knaplund explores the history of state and federal laws relating to charitable bequests in the twentieth century.  She first discusses the Revenue Act of 1916, which established the federal estate tax – initially with no deduction for bequests to charity (the deduction was added in 1918).  Meanwhile, state law began the century with restrictive attitudes and legislation (limiting amounts testators could leave to charity and taxing transfers to them).  By century’s end, the state law outlook for charitable givers was substantially more positive, with the legitimacy of charitable trusts well-established and mortmain statutes quickly crumbling.

With the historical background now illuminating our perspective, Professor Knaplund examines the current debate on whether the removal of the estate tax incentive for charitable giving would indeed deliver a death blow to nonprofits.  While federal law has frequently been less than supportive of charitable transfers, modern state law is on a fairly consistent trajectory toward facilitating charitable gifts.  To make an accurate prediction as to how charities will fare, we must acknowledge the dualist system of regulation, and take into account both federal and state law influences on charitable giving.  Professor Knaplund concludes that our charitable sector will emerge largely unscathed from a lapse in the federal estate tax incentive to make charitable gifts.

What is refreshing about Professor Knaplund’s publication is the historical context in which she puts the dilemma of how much federal tax support charitable givers need.  Empiricism may be trendy in legal scholarship, but this article serves as a reminder of how much historical analysis can offer trusts and estates doctrine.

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Cite as: Alyssa DiRusso, The Effect of State and Federal Regulation on Charitable Giving: A Historical Analysis, JOTWELL (November 8, 2010) (reviewing Kristine S. Knaplund, Charity for the Death Tax? The Impact of Legislation on Charitable Bequests, 45 Gonz. L. Rev. 713 (2010), available at SSRN),