Notice & Comment

Governmental and Semi-Governmental Federal Charitable Entities, by Ellen P. Aprill

The standard view of the relationship between government and the nonprofit charitable sector treats them as separate and distinct. But they are not. Numerous federal agencies have statutory authority to receive tax-deductible charitable deductions. Their ability to do so, however, undermines the oversight accomplished through the Constitutionally-mandated appropriations process. Congress has also created many nonprofit tax-exempt organizations. These entities enjoy flexibility as to fundraising, investment, and spending that government agencies lack. At the same time, they avoid the accountability that various federal statutes impose on government agencies, on the one hand, and that state nonprofit laws accomplish for private nonprofit organizations, on the other. Yet, these Congressionally-established nonprofits retain significant governmental ties, such as service by government officials on their boards and reliance on appropriations. These practices produce at best a precarious balance between the governmental and non-governmental. Moreover, Congress has bestowed honorific charters on dozens of on pre-existing nonprofit tax-exempt organizations.

I recently posted on SSRN the draft of an article that examines all of these types of entities and the issues they raise under tax law, nonprofit law, constitutional law and administrative law. Below, I give examples of the entities and issues that the piece considers.

The Miscellaneous Receipts Act limits the sources of funding for federal government agencies. It provides that “an official or agent of the Government receiving money for the Government from any source shall deposit the money in the Treasury as soon as practicable without deduction for any charge or claim.” Despite the seemingly absolute language of the Constitution’s Appropriations Clause and the Miscellaneous Receipts Act, government agencies are permitted to accept for their own uses gifts of money or other property when – and to the extent – they are given explicit statutory authority. Examples of government agencies with such authority include the Department of State, the Library of Congress, the Department of Health and Human Services, and the Department of Justice. As Kate Stith wrote more than 30 years ago, when an executive agency is prepared to accept donations, “Congress loses effective control over the contours of authorized government activity.”

The Smithsonian Institution is the first and arguably the most prominent of the numerous Congressionally-created tax-exempt nonprofits. In 1829. an Englishman named James Smithson – who had never visited or corresponded with anyone in this country – bequeathed a large amount of money “to found at Washington, under the name of the Smithsonian Institution, an Establishment for the increase & diffusion of knowledge among men.” Today, it describes itself as “the world’s largest museum, education, and research complex, with 19 museums, the National Zoo, and nine research facilities. In 2007 it engaged an independent review commission to investigate widespread reports of inappropriate behavior by its then-Secretary. The commission identified failures of governance and management, faulting the lack of federal common law regarding board duties and obligations. It questioned the ability of the Chief Justice and the Vice President to devote the hours required to discharge their fiduciary duties as Smithsonian board members. It called for the Smithsonian, which is funded primarily by appropriations, to adopt procedures for transparency, disclosure, and compensation consistent with statutes governing federal agencies. The Smithsonian accepted a number, but not all, of these recommendations. In particular, no change to its board structure has taken place.

Sometimes Congress authorizes a federal agency to accept charitable gifts and also establishes a nonprofit tax-exempt entity to fundraise for it. The Center for Disease Control, for example, is eligible to receive deductible contributions. Nonetheless, Congress has also created the National Foundation for the Centers for Disease Control and Prevention (CDC Foundation). On its webpage the CDC Foundation describes itself as “an independent nonprofit and the sole entity created by Congress to mobilize philanthropic and private-sector resources to support the Centers for Disease Control and Prevention’s critical health protection work.” The CDC Foundation’s crowdfunding site for covid relief raised more than $51 million, one of the most successful charitable crowdfunding efforts to date. Its efforts thus increased capacity to fight the pandemic. But these relationships between government agencies and governmental nonprofits risk at least the appearance of undue influence. Professor Jon Michaels has detailed giving by Genentech to the CDC Foundation “to support the CDC’s campaign to encourage greater testing and treatment for viral hepatitis,” pointing out that Genentech, a maker of testing kits and treatment for hepatitis, was a potential beneficiary of the CDC’s campaign.

Subtitle II, Part B of Title 36 of the U.S. Code lists 94 patriotic and national nonprofit organizations with Congressional charters (“Title 36 corporations”). They include such well-known organizations as the Boy Scouts of America, the Girl Scouts of America, and the American Olympics Committee. Others, such as the Fleet Reserve Association or the Agricultural Hall of Fame, are not well known. Somewhat more than half of these Title 36 corporations were created by Congress; the rest have been awarded Congressional charters long after their formation as private tax-exempt nonprofit organizations. As the CRS has explained, this bestowal of honorary charters erroneously implies Congressional endorsement and oversight of these groups.

Examination of all these governmental and semi-governmental entities confirms Anne Joseph O’Connell’s observation that in the case of “bureaucracies at the border,” of which these groups form a subset, “efficiency may not always trump accountability.” Thus, my article makes specific recommendations to increase accountability of both government agencies and Congressionally-established nonprofit entities. For example, it urges Congress to undertake a comprehensive review of agency gift acceptance policies and to curtail the widespread practice of appointing government officials to nonprofit boards. More fundamentally, it calls for acknowledgment of these hybrid entities. It argues for viewing government and charity as resting on a continuum rather than each floating in its own untethered conceptual space. This approach clarifies our understanding of government, the nonprofit sector, and the relationship between them. Use of a continuum reminds us that our nation faces a choice between the private and public – or some mix of the two – in funding activities in which both government and charitable nonprofits engage.

Ellen P. Aprill is the John E. Anderson Professor of Tax Law at LMU Loyola Law School. Professor Aprill is happy to receive comments on her draft at

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