For-profit charity is an intriguing idea. 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. 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. 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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