The Charitable Tax Exemption is About Much More than Efficiency

Efficiency is often used as a proxy for discussing nonprofit charity effectiveness, but such ostensibly objective measures can limit any true understanding of charities' potential. Although efficiency is the hallmark of many theories of charitable tax exemption and is sometimes useful, the conceptual framework falls short as a way to judge a nonprofit charity's worth or legitimacy. I would argue that the role of a nonprofit charity is to build contextual diversity in society and to continuously seek inclusion and justice. This role is a basic facilitator of the nation's democratic ideals. But facilitating justice may sometimes require that charities disrupt current norms and even act inefficiently. The third sector, as it is sometimes called, is supposed to continually recreate "the commons," or provide for public benefit. And clearly, this focus on collective benefit doesn't serve the best interest of individuals; it serves the public at large or a disenfranchised minority. This discussion proposes a concept called "contextual diversity" as an alternative understanding of the charitable tax exemption. The concept is based on two theoretical constructs that better fit as justifications for the charitable tax exemption and for the value of nonprofit work in general: (1) law and market theory and (2) critical race theory