ABSTRACT
The possible bases for charitable tax exemption surveyed so far face a pair of correlative problems under our criteria for evaluation. Using charitable trust law as the basis for exemption decisions is patently overinclusive by failing to test for whether such entities provide social services that are worthy of the exemption in the modern milieu. To fully meet the deservedness criterion, the community benefit theory should show that the social benefits claimed by nonprofit firms are real and that they would be lost without the exemption. Without this "but for" connection, the economic benefit of tax exemption is a waste or a windfall. The community benefit theory faces a final set of problems under the proportionality criterion. Since proportionality seeks to test whether the size of the public subsidy is roughly commensurate with the size of the community benefit, it requires an articulation of community benefit that is measurable in at least some rough quantitative fashion.
