Handbook of Research on Nonprofit Economics and Management
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Handbook of Research on Nonprofit Economics and Management

Second Edition

Edited by Bruce A. Seaman and Dennis R. Young

Building on the success of the first edition, this thoroughly revised and expanded edition explores (1) areas of general agreement from previous research; (2) areas of conflicting results and unexplored questions; (3) the relative roles of theory, data availability and empirical analysis in explaining gaps in our knowledge; and (4) what must be done to improve our knowledge and extend the literature. Selected original chapters addressing especially challenging topics include the value of risk management to nonprofit decision-making; nonprofit wages theory and evidence; the valuation of volunteer labor; property tax exemption for nonprofits; when is competition good for the third sector; and product diversification and social enterprise; international perspectives; the application of experimental research and the macroeconomic effects of the nonprofit sector.
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Chapter 19: State and federal tax policy toward nonprofit organizations

James Alm and Daniel Teles


State and federal tax policy in the United States generally favors nonprofit organizations, and particularly nonprofits classified as 501(c)3 nonprofit charities. This favorable tax treatment comes from two types of tax policies. First, nonprofits are exempt from paying a variety of taxes, including the federal corporate income tax (CIT) and many state and local taxes. Second, individuals are encouraged to donate to nonprofit charities through favorable policies in the federal income tax, state income taxes, and the inheritance tax. In this chapter we present some basic material on the tax treatment of nonprofit organizations and then examine what we know and what we do not know about state and federal tax policy toward nonprofit organizations.

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