Tax Analysts, a leading global provider of tax news and analysis, has published an article written by Sarah Katherine Johnson, ’14, concerning a tax loophole that allows donors to scholarship funding organizations to actually make a profit from their charitable giving. Johnson’s article was submitted as part of a student writing competition, and it appears in this week’s edition of State Tax Notes, Tax Analysts’ weekly print and online magazine that provides news, analysis and commentary on state tax issues.
The article, titled “Making a Profit from Charitable Donations in South Carolina,” (PDF) delves into the state legislature’s inclusion of a budget proviso in the 2013-2014 and 2014-2015 appropriations bills that allows taxpayers to receive dollar-for-dollar tax credits for donations made to scholarship funding organizations that provide tuition assistance to needy students attending private secondary schools. Donations to these same organizations also qualify for charitable contribution deductions as allowed by the IRS, thus creating a dual benefit tax credit that lets taxpayers receive tax benefits greater than their contributions. Johnson’s article raises the question of whether the IRS should disallow the deduction, providing examples of cases where it has previously disallowed charitable contributions that amounted to a quid pro quo.
Johnson began working on the article in 2012 as a 2L in Richard Handel’s State and Local Tax Class. “The original paper for class was a for/against piece on the legislature adopting private secondary school tax credits,” she said. “I expanded on that for this paper, which Professor Handel suggested I submit to Tax Analysts for possible publication.”
“Sarah’s article was well-written and followed up on an article by one of our authors that readers found interesting,” says Laura Breech, editor of State Tax Notes. “Further, credits and deductions are of general interest to our readers, and Sarah provided a nice comparison.”
Johnson is currently awaiting her admission to the North Carolina Bar, after which she plans to work for the employment team in Parker Poe Adams & Bernstein’s Charlotte office. A graduate of Wofford College, she attended the School of Law as a legacy. Her father, Brown Johnson, received his J.D. from the University of South Carolina in 1972.