chapter  6
23 Pages

The New World of Nonprofit Activity

ByNorman I. Silber

For more than a century, labor unions, churches, foundations, hospitals, museums, universities, opera companies, orphanages, sports organizations, fraternities, temperance societies, and political parties were organizable as nonprofit trusts or corporations. The supposed effectiveness of disclosure rules as a way for either consumers or the government to spot fraud, inefficiency, or an absence of social value in nonprofits was vastly overrated. Administrative bodies would presumably do better to conserve their resources and capitalize on specialized expertise by devoting their attention to functional categories of economic activity— laws against fraud, misrepresentation, or price-fixing. Federal tax authorities and others who conferred tax benefits appreciated the fact that in addition to private foundations, other nonprofit corporations could be formed more easily than before. Internal Revenue Service (IRS) officers screened nonprofits in order to award them particular tax subsidies for an agency that had, as its objective, curbing abuses in tax avoidance and revenue minimization techniques.