Estate Tax Avoidance and Private Benefit Through Charitable Giving

I study how charitable contributions reported by nonprofit entities respond to variation in the federal and state estate tax rate. I focus on the asymmetric response by nonprofit vehicle type to changes in federal and state estate tax policy in the US since 2000, distinguishing between private charities and public charities and between family foundations and non-familial private foundations. I find that private foundations respond between 7 and 10 times as strongly as public charities in response to variation in the top estate tax rate, exhibiting reported contributions elasticities of around 2 for changes in the federal estate tax and around 1 for same-state-level reforms. I also document a significant positive (negative) relationship between private foundation entry (exit) and estate tax rates. I document little difference in response between familial and non-familial foundations. Finally, I show that private foundations feature greater opacity in terms of their charitability objectives, demonstrate higher propensity to engage in self-benefiting transactions, and allocate greater shares of their expenses to administrative activities. This work demonstrates that the well-documented positive relationship between charitable bequests and estate taxation is largely driven by private foundations whose activity is associated with greater measures of private benefit