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In “The Case for For-Profit Charities,” Professors Malani and Posner urge an end to the coupling of certain tax benefits and the nonprofit corporate form. 1 Unlike many theoretical essays in taxation, they conclude with rather concrete policy proposals. As a first best option, they suggest that if the government is going to give tax advantages to community-benefit activities, then it should extend those advantages across corporate forms. For the weak of heart, they propose as a second best, less dramatic alternative that the IRS relax constraints on the ability of nonprofits’ managers to take incentive pay. Malani and Posner have failed, however, to make the affirmative case for their broad recommendation. The case for relaxing the constraints on incentive pay is stronger, though not, as I suggest below, without problems.
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By Victor Fleischer
For-profit charity is an intriguing idea.1 At a high level abstraction it is already proving useful. For-profit entrepreneurs and investors often consider the broader social impact of their work, evaluating projects in terms of social returns as well as investment returns.2 On the nonprofit side, the concept encourages firms to use incentive compensation to reduce managerial slack and to inject a dose of accountability into a sector that needs it.3 But as a tax concept—that is, as a category of firms exempt from tax—“for-profit charity” might be unworkable, at least in the form suggested by Professors Malani and Posner.
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By Richard A. Epstein
Professor Jennifer Rothman has written a long and thoughtful article whose central thesis is that we should be cautious about using customary practices to decide intellectual property cases, especially in the copyright area. At the theoretical level, her skepticism about custom is at odds with the defense of custom that I have offered in previous writings and still defend in a wide range of tort and contractual contexts. I am grateful that the editors of the Virginia Law Review have invited this brief response, which accepts some of Professor Rothman’s main points but dissents on others.
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The differences between myself and Rothman arise because she extends [her] critique to customs that I think work well in their broader institutional context. In this brief comment I shall address three such cases. The first deals with the brief use of copyrighted material in set dressings. The second concerns the major settlement between the publishers and universities over the scope of the fair use privilege, and the last concerns the ability of individual scientists and researchers to make personal copies of copyrighted materials.
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