The Tax Law of Charitable Giving. Bruce R. Hopkins

knows how many.”¹⁰³

Most nonprofit organizations are tax-exempt entities, however, and the number of those entities is in excess of two million. The IRS's data for the federal government's fiscal year 2019 reflect 1,718,233 recognized conventional exempt organizations.¹⁰⁴ Of these, 1,365,744 are charitable, educational, religious, scientific, and similar entities. Other categories of exempt organizations include social welfare organizations (79,808),¹⁰⁵ trade associations and other types of business leagues (62,700),¹⁰⁶ social and recreational clubs (49,126),¹⁰⁷ labor and agricultural organizations (45,888),¹⁰⁸ fraternal beneficiary societies (41,756),¹⁰⁹ veterans' organizations (28,575),¹¹⁰ and cemetery companies (9,406).¹¹¹ Exempt organizations filed 1,118,006 annual information returns and similar forms in that year.¹¹²

In an understatement, the observation was made that “[m]easuring the number of organizations in the independent sector is a complex activity, largely because of the diversity of its components.”¹¹³ There are several reasons for this. One reason is that church organizations (of which there are an estimated 350,000¹¹⁴) are not required to file annual information returns with the IRS,¹¹⁵ so data concerning them is difficult to amass. Also, hundreds of organizations fall under a group exemption¹¹⁶ and thus are not separately identified. Further, smaller nonprofit organizations need not seek recognition of tax exemption from the IRS.¹¹⁷ Small organizations are not required to file annual information returns with the IRS but are required to electronically file a short notice as to their existence.¹¹⁸

Because a “price cannot be placed on the output of most nonprofit organizations,” their percentage of the gross domestic product is difficult to assess; the best estimate is that it is about 5 percent.¹¹⁹ When the measure is in terms of wages and salaries paid, the percentage rises to approximately 8 percent.¹²⁰ Other ways to measure the size of the sector are its revenue (about $1,006.7 billion in 2006),¹²¹ its outlays (about $915.2 billion in 2005),¹²² and its paid employment (12.9 million individuals in 2005).¹²³ Most of the sector's revenue is in the form of fees for services provided, followed by contributions and grants.¹²⁴ As to outlays (2006 data), the funds are expended by the organizations (88.7 percent), granted (8 percent), or invested or used as a buffer for cash flow (3.3 percent).¹²⁵

Charitable giving in the United States in 2019 is estimated to have totaled $449.64 billion.¹²⁶ Giving by individuals in 2019 amounted to an estimated $309.66 billion; this level of giving constituted 69 percent of all charitable giving for the year. Grantmaking by private foundations is an estimated $75.69 billion (17 percent of total funding). Gifts in the form of charitable bequests in 2019 are estimated to be $43.21 billion (10 percent of total giving). Gifts from corporations in 2019 totaled $21.09 billion (5 percent of total giving for that year).

      Contributions to religious organizations in 2019 totaled $128.17 billion (29 percent of all giving that year). Gifts to educational organizations amounted to $64.11 billion (14 percent); to human service entities, $55.99 billion (12 percent); to foundations, $53.51 billion (12 percent); to health care institutions, $41.46 billion (9 percent); to public/society benefit organizations, $37.16 billion (8 percent); to international affairs entities, $28.99 billion (6 percent); to arts, culture, and humanities entities, $21.64 billion (5 percent); and to environment and animals groups, $14.16 billion (3 percent).

According to the most recent IRS data, total noncash charitable contributions increased by 15 percent from $64 billion in 2015 to $73.6 billion in 2016.¹²⁷ The average noncash contribution amount per tax return increased from $7,607 to $8,509 during this period. The number of individual returns filed with a Form 8283¹²⁸ increased by 2.8 percent from 8.4 million for 2015 to 8.7 million for 2016.

      Contributions of corporate stock represented the largest share of total noncash gifts, in terms of value claimed. For 2016, corporate stock donations totaled $32.7 billion, an increase of 13.2 percent from 2015, representing 44.4 percent of all these donations. The average stock contribution per return in 2016 was $199,939. Gifts of clothing ($11.5 billion) constituted the second-largest category; the average such gift per return was $1,765.

      All adjusted gross income groups with incomes above $100,000 reported increases in deducted noncash contributions. The largest increase was by taxpayers in the $5 million–under $10 million group, who contributed $5.5 billion in value in 2016, an increase over the prior year of 37.9 percent. Taxpayers in the $10 million-or-more income group contributed 38.1 percent of all noncash gifts, or $28.1 billion.

      Private foundations received the largest share of these contributions, in the amount of $18.4 billion (25.1 percent of the total). The average of these gifts is $213,661 (the highest average gift amount for all types of charities). The next-largest type of charitable recipient was “large organizations”; they received $16.6 billion in noncash gifts.

      Donors aged 65 and over contributed the most, giving $27.8 billion (37.7 percent of the total); this is an average of $16,030 per return. Contributions of stock, mutual funds, and other investments by these taxpayers (the largest type of gift for this group) were $17.9 billion, representing 48 percent of the total amount.

Here are some other perspectives on the nonprofit sector: it (1) has more civilian employees than the federal government and the 50 state governments combined; (2) employs more people than any of the following industries: agriculture; mining; construction; transportation, communications and other public utilities; and finance, insurance, and real estate; and (3) generates revenue that exceeds the gross domestic product of all but six foreign countries: China, France, Germany, Italy, Japan, and the United Kingdom.¹²⁹

      Statistics, of course, cannot provide the entire nonprofit sector picture. As the Commission on Private Philanthropy and Public Needs observed (albeit nearly 50 years ago), the “arithmetic of the nonprofit sector finds much of its significance in less quantifiable and even less precise dimensions—in the human measurements of who is served, who is affected by nonprofit groups and activities.” The Commission added:

      In some sense, everybody is [served or affected by