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Why Are Nonprofits Exempt From the Corporate Income Tax?

Indiana University

This article considers the nonprofit exemption from the corporate income tax (CIT), which has typically been justified with either subsidy or base-defining reasons. A different rationale is introduced: The corporate tax as applied to for-profit businesses is meant to capture in the tax base income ultimately owned by individuals that might otherwise escape tax, and the nonprofit exemption is a consequence of nonprofit income`s not being attributable to any individual. To explain why nonprofits are exempt from the CIT, scholars should begin by asking why there is a CIT at all rather than by asking what is so special about nonprofits. The argument is then applied to the debate over the rationale for the unrelated business income tax.

Key Words: nonprofits • corporate income tax • unrelated business income tax • tax exemption

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This version was published on December 1, 2007

Nonprofit and Voluntary Sector Quarterly, Vol. 36, No. 4, 662-675 (2007)
DOI: 10.1177/0899764006298956


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This Article Abstract Free Full Text (Free PDF) Free Alert me when this article is cited Alert me if a correction is posted Services Email this article to a friend Similar articles in this journal Similar articles in Web of Science Alert me to new issues of the journal Add to Saved Citations Download to citation manager Request Permissions Request Reprints Add to My Marked Citations Citing Articles Citing Articles via Google Scholar Citing Articles via Scopus Google Scholar Articles by Rushton, M. Search for Related Content Social Bookmarking                         What's this?