Professor Benjamin Leff - "Why Non-Profits Should Remain Non-Profits"

Faculty Scholarship Highlight, September 2012

Associate Dean for Scholarship Stephen Vladeck talks with Associate Professor Benjamin Leff.

To understand the scholarship of AUWCL Associate Professor of Law Ben Leff is to understand the intersection between federal tax laws and the laws governing charitable organizations. At the heart of that intersection is the "non-distribution constraint" - the idea that charitable groups should be prohibited from distributing their profits among private persons. Indeed, this very principle is what makes such institutions "non-profit." In recent years, however, a number of scholars have begun to critique the non-distribution constraint, arguing that it unnecessarily impedes charitable work insofar as it creates disincentives for a new breed of "social enterprises" that seek to raise funds from both for-profit investors and charitable donors-and thereby limits the extent to which these entities can successfully raise capital and/or attract the best and most successful managerial staff.

In his research and writing, Professor Leff, who joined the faculty in 2009, has offered a response to these critiques. For example, in "The Case Against For-Profit Charity," which appears in the most recent issue of the Seton Hall Law Review, he suggests that the debate in recent years has largely ignored the government's independent interest in facilitating the provision of charitable goods. In his words, "when the government wants to provide services under conditions in which the quality of these services is hard to measure or hard to observe, it acts reasonably when it provides tax subsidies only for those providers who are subject to the non-distribution constraint." That is to say, because the government has an interest in maximizing the provision of charitable goods independent of the economic interests of charitable donors and entrepreneurs, the non-distribution constraint can be defended as necessary to maximize the government's heretofore underappreciated (and undertheorized) interest.

Although "The Case Against For-Profit Charity" is framed as a specific response to the contemporary critiques of the non-distribution constraint, Professor Leff's broader research agenda has at its core a more complete articulation of the government's distinct interest in maximizing charitable goods in the abstract, and the extent to which both federal tax law and the law of charitable organizations should move toward more single-mindedly focusing on the protection and solidification of that distinctly social policy goal.