The Role of Access in Charitable Tax Exemption

Why are some activities that have commercial for-profit analogues (e.g., health care, "public interest" law firms, community redevelopment organizations) tax exempt? This article proposes an "access" test for tax exemption that would require nonprofit organizations whose services have commercial analogues to justify exemption on the basis of access to their services: either by providing access to underserved populations or by bringing services to the general population that are undersupplied by the private market. The article begins by exploring a number of Internal Revenue Service rulings and court cases dealing with charitable organizations that provide services that have commercial analogues and concludes that the IRS and courts are actually using access criteria to evaluate tax exemption. The article then relates an access-based test to the major theoretical bases for tax exemption, and then proceeds to propose an access-based doctrinal test for exemption. The article closes by illustrating how an access-based test would apply to current areas of exemption controversy.