Editors’ Note: Ellen P. Aprill comments on how President Trump’s recent decision to donate his salary to the Department of Health and Human Services fits into her latest research project on the boundaries between private charitable donations and public funds.
On March 3, President Trump’s Press Secretary, Stephanie Grisham, announced on Twitter that, consistent with his commitment to donate his salary while in office, President Trump was giving his 2019 fourth quarter salary to the Department of Health and Human Services “to support efforts being undertaken to confront, contain, and combat #Coronavirus.” The announcement prompted questions about whether such an earmarked donation to a federal agency is possible. The answer in this case is yes, but getting to that answer requires several statutory steps and implicates a set of issues I just happened to have begun to research.
For taxpayers who itemize rather than take the standard deduction, section 170(c)(1) of the Internal Revenue Code permits a charitable contribution deduction for “a contribution or gift to or for the use of . . . the United States or the District of Columbia . . . if the contribution or gift is made for exclusively public purposes.” In general, gifts to the federal government must go to the general fund of the Treasury; agencies cannot augment Congressional appropriations. To that end, the miscellaneous receipts statute 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.” Governmental agencies, however, can be given specific statutory authority to accept and retain donations. It turns out that the Department of Health and Human Services is one of the federal agencies with statutory authority to accept gifts for its benefit “or for carrying out any of its functions.” Thus, Trump’s gift is kosher.
In fact, the Department of Health and Human Services is not the only agency with authority to accept donations. Other examples include the Library of Congress, the Department of Justice, the Federal Communications Commission, and the National Archives. Indeed, all gifts given to a U.S. President from foreign dignitaries must be transferred to the National Archives.
Moreover, as is becoming clear from my research, the possibility of making a charitable donation to a governmental body with this kind of statutory authorizations is but the most obvious way in which the lines between private and public are functionally blurred by donations eligible for the charitable contribution deduction to governmental or governmentally-affiliated institutions.
The United States Constitution authorizes Congress to pass all laws “necessary and proper” to implement its expressly assigned powers. McCulloch v. Maryland made clear that the necessary and proper clause empowered Congress to charter corporations, entities separate from the government and government agencies with a written grant from the government specifying the entities’ rights, privileges, and purposes. This chartering power extends to for-profit organizations, such as federal banks, as well as nonprofit organizations and within the private as well as governmental sectors. Many federally affiliated nonprofit organizations qualify as what we usually refer to as charities – that is entities tax-exempt under section 501(c)(3) contributions to which are deductible as charitable contributions under section 170(c)(2) of the Internal Revenue Code.
Certain charities established by Congress are also authorized to receive Congressional authorizations. The Smithsonian Institution, with its fascinating history dating back to the 1830’s, and the National Gallery of Art, founded in 1937 from gifts of art and money from Andrew Mellon, are among the best known of these kinds of federal charities.
Some federal charities authorized to receive appropriations have only a federal legal identity. Others that receive at least some appropriations, such as the Corporation for Public Broadcasting (1967), have been established by Congress under the nonprofit laws of other jurisdictions, particularly the District of Columbia. Yet others were established by statute for federal purposes, but do not receive appropriations. Examples of this category include the National Academy of Sciences, which was established in 1863 at the height of the Civil War and the National Parks Foundation (1967), the board of which is under the control of the Secretary of the Interior. David Rubenstein, so famous for his “patriotic philanthropy,” has made hundreds of millions of dollars in donations to the National Parks Foundation for the benefit of the Jefferson Memorial, the Washington Monument, and the Lincoln Memorial.
There are more categories of entities related in some way to the federal government and able to accept deductible charitable contributions. For a time, Congress chartered what we would today call private foundations, section 501(c)(3) exempt organizations funded by an individual, family or corporation. Despite the famous refusal of Congress to charter the Rockefeller Foundation, as HistPhil co-editor Benjamin Soskis has written, “[s]ome thirty-four corporations had secured incorporation by Congress between 1889 and 1907,” including the Rockefeller-funded General Education Board (1903), the Carnegie Institution (1904), and the Carnegie Foundation for the Advancement of Teaching (1906).
But we are not yet done. A large portion of an entire title of the U.S. Code, Title 36, is devoted to patriotic and national organizations, nearly 100 private organizations that have been “chartered” by Congress without having any federal responsibilities. Most of these organizations were established and operated under state law before receiving these so-called federal charters. They include, for example, Big Brothers and Sisters, Boy Scouts of America, Disabled American Veterans, and the United States Olympic Committee. As the Congressional Research Service has explained, Title 36 chartering “does not make these organizations ‘agencies of the United States’ or confer any powers of a governmental character or assign any benefits. . . In effect, the federal chartering process is honorific in character. his honorific character may be misleading to the public, however.” (The Red Cross is also a Title 36 Corporation, but it is the sole entity under another category, Treaty Obligation Organizations. As its charter makes clear, the federal government has assigned to the Red Cross the duty of fulfilling U.S. Treaty obligations under the Geneva Convention and responding to disasters.)
To date, I have identified one further category of what I would dub federally affiliated charities – state nonprofits affiliated with governmental departments or agencies. Several agencies – such as the CDC, the FDA, and NASA, for example – have their own foundations. At one time, the National Park Foundation, for example, was authorized specifically to help create state nonprofits at the individual national park unit level. That provision was repealed in 2014, but a great many national parks, including Grand Teton, Glacier, and Sequoia, have state charitable nonprofits supporting them. The Department of Veterans Affairs has authority to establish nonprofit research and education corporations chartered under resident state law, and a large number of these entities exist, describing themselves as a “legal oddity.”
Depending on which of these porous and overlapping categories or subcategories apply, these federally affiliated charities raise a host of legal issues. Here are a few. Why can some agencies, but not others, accept charitable gifts? Does the debt of federally affiliated charities have the full faith and credit of the United States? Is augmenting appropriations with charitable gifts constitutional? What is their legal personhood? To what extent do federal laws, such as Civil Service limitation and FOIA, apply to them?
Moreover, the existence of all these federally affiliated charities asks us to revisit longstanding questions regarding the relationship between charity and government. Researchers often ask whether this relationship is complementary, supplementary, or adversarial, while focusing on state and local governments. When much charitable activity is tied to the federal government itself, we may need to refine, if not reconsider, our theories of the nonprofit sector. As I begin this exploration, I welcome advice and suggestions from others. My initial research seems to confirm the position that some others have recently taken – that the lines between charitable gifts and governmental funds overlap more than we have generally assumed.
This brief overview, moreover, points out the irony of President Trump’s gift of his fourth quarter salary to HHS (in fact, he’s been making gifts of his salary to a different agency each quarter). Here he had many choices in the way he could personally support efforts to combat COVID-19. But, despite his frequently expressed disdain for the federal bureaucracy, he decided to make a donation directly to the single largest federal agency.
Ellen P. Aprill is John E. Anderson Char in Tax Law at Loyola Law School. Before coming to Loyola in 1989, Aprill served for two years in the Office of Tax Policy in the United States Department of the Treasury, and practiced for several years with the law firm of Munger, Tolles & Olson in Los Angeles.