A History of the Tax-Exempt Sector:

A History of the Tax-Exempt Sector:

An SOI Perspective

by Paul Arnsberger, Melissa Ludlum, Margaret Riley, and Mark Stanton

T

he origins of the tax-exempt sector in the

United States predate the formation of the

republic. Absent an established Governmental

framework, the early settlers formed charitable and

other “voluntary” associations, such as hospitals, fire

departments, and orphanages, to confront a wide variety of issues and ills of the era. These types of voluntary organizations have continued to thrive in the

United States for centuries. In 1831, during his historic visit to the United States, Alexis de Tocqueville

observed:

“Americans of all ages, conditions, and dispositions constantly unite together. Not only

do they have commercial and industrial associations to which all belong but also a thousand other kinds, religious, moral, serious,

futile…Americans group together to hold

fetes, found seminaries, build inns, construct

churches, distribute books…They establish

prisons, schools by the same method…I have

frequently admired the endless skill with

which the inhabitants of the United States

manage to set a common aim to the efforts of

a great number of men and to persuade them

to pursue it voluntarily.”1

Voluntary associations comprised two distinct

types of organizations—public-serving and member-serving.2,3 Early public-serving, or charitable,

organizations included schools, churches, and other

voluntary organizations designed to provide services

to the public. The popularity of voluntary charitable

organizations in the United States, even in the midst

of strengthening State and Federal governments,

suggests that perhaps these organizations, with their

well-established structures and programs, were able

Paul Arnsberger and Margaret Riley are statisticians, and

Melissa Ludlum and Mark Stanton are economists, with the

Special Studies Special Projects Section. This article was

prepared under the direction of Barry W. Johnson, Chief.

to fill a gap in social welfare programs where the

young Government’s efforts proved insufficient.

Another suggestion is that many early Americans

embraced charitable organizations over Government

programs because they feared “the rebirth of monarchy, or bureaucracy.”4

By the end of the 19th century, private philanthropy, as typified by the modern private foundation,

had joined voluntary associations as an important

component of the public-serving charitable sector of

the United States. The foundation originated from

the charitable trust, a tool for giving that became

widely used in this period.5 In the early 20th century, a number of American industrialists, wishing

to direct their newly acquired wealth toward a broad

range of altruistic endeavors, created private foundations that remain prominent today. Unlike other

early charitable organizations, private foundations

generally were controlled and funded by a single

source, such as an individual, corporation, or family. Andrew Carnegie articulated the vision of these

early philanthropists in his essay, “The Gospel of

Wealth,” where he argued that a wealthy individual

should “consider all surplus revenues which come to

him simply as trust funds, which he is called upon to

administer, and strictly bound as a matter of duty to

administer in the manner which, in his judgment, is

best calculated to produce the most beneficial results

for the community…”6

Member-serving associations, including fraternal societies, were also popular among early Americans. The Freemasons, for example, have roots in

17th century England and count a number of this

Nation’s founding fathers as members. By the 19th

century, mutual benefit associations, serving members in areas such as banking and insurance, began

to flourish. Additionally, labor and agricultural organizations, established to promote the interests of

their members, started to take root across the Nation

around this time.

Voluntary associations and philanthropic vehicles

continue to coexist and forge a relationship with

1 Tocqueville, Alexis de, Democracy in America (2003), Penguin Books, London, England, p. 596

2 For the most part, public-serving organizations are those that are now described under section 501(c)(3) of the Internal Revenue Code.

Member-serving organizations are

those covered under other subsections of 501(c). Appendix A at the end of this article provides detailed information on organizations exempt under section 501(c).

3 See: Salamon, Lester M. (1992), America’s Nonprofit Sector: A Primer, The Foundation Center, New York, NY, p. 14.

4 Ibid., p. 7.

5 Chester, Ronald (1982), Inheritance, Wealth, and Society, Indiana University Press, Bloomington, Indiana, p. 95.

6 Carnegie, Andrew (2001), “The Gospel of Wealth,” The Nature of the Nonprofit Sector, editor J. Steven Ott. Westview Press, Boulder, CO, p. 68.

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A History of the Tax-Exempt Sector: An SOI Perspective

Statistics of Income Bulletin | Winter 2008

Government that remains into the 21st century. A

significant component of this relationship is Government’s recognition of the importance of the charitable

and voluntary sector, and the support of its organizations in the form of an exemption from income and

certain other taxes. This article explores the legislative history of tax exemption and presents historical

data that highlight recent financial trends among taxexempt organizations.

Legislative History of the Tax-Exempt Sector

The structure of tax exemption granted to the charitable and voluntary sector outlined in the United

States Tax Code was developed through legislation

enacted between 1894 and 1969. Over that 75-year

period, Congress established the basic principles

and requirements of tax exemption, identified business activities of tax-exempt organizations that were

subject to taxation, and defined and regulated private

foundations as a subset of tax-exempt organizations.

Figure A shows a timeline of major legislative actions relevant to tax-exempt organizations, while a

more complete history can be found in Appendix B

at the end of this article.

Early Legislation, 1894-1936

106

The privileged tax treatment that the Government

grants to charitable and member-serving organizations can be traced to the earliest versions of United

States tax law. Early tax-exemption regulations

developed around three major principles. First, organizations that operated for charitable purposes

were granted exemption from the Federal income

tax. Second, charitable organizations were required

to be free of private inurement—that is, a charitable

organization’s income could not be used to benefit

an individual related to the organization. Finally, an

income tax deduction for contributions, designed to

encourage charitable giving, was developed.

The Wilson-Gorman Tariff Act of 1894, one of

the earliest statutory references to the tax-exempt status enjoyed by charitable organizations, established

the requirement that tax-exempt, charitable organizations operate for charitable purposes. While establishing a flat 2-percent tax on corporate income, the

act stated “nothing herein contained shall apply to…

corporations, companies, or associations organized

and conducted solely for charitable, religious, or

Figure A

Major Exempt Organization Legislation,

1894-Present

Tariff Act of 1894 - Earliest statutory reference to tax exemption for

certain organizations.

Revenue Act of 1909 - Introduced language prohibiting private

inurement.

Revenue Act of 1913 - Established income tax system with tax

exemption for certain organizations.

Revenue Act of 1917 - Introduced individual income tax deduction for

charitable donations.

Revenue Act of 1918 - Estate tax deduction for charitable bequests

added.

Revenue Act of 1934 - Set limits on lobbying activities by charitable

organizations.

Revenue Act of 1936 - Introduced corporate tax deduction for

charitable contributions.

Revenue Act of 1943 - Required first Forms 990 to be filed.

Revenue Act of 1950 - Established unrelated business income tax.

Revenue Act of 1954 - Modern tax code established, including section

501(c) for exempt organizations. Also, limits on political activities

established.

Revenue Act of 1964 - Raised the limitation on deduction for donations

to public charities to 30 percent of adjusted gross income (AGI).

Tax Reform Act of 1969 - Established private foundation rules,

including a minimum charitable payout requirement and a 4-percent

excise tax on net investment income, and raised the limitation on the

deduction for donations to operating private foundations and public

charities to 50 percent of AGI.

Revenue Act of 1978 - Reduced the net investment income excise tax

for private foundations to 2 percent.

Deficit Reduction Act of 1984 - Raised the limitation on the deduction

for donations to nonoperating private foundations to 30 percent of AGI

and introduced other more favorable rules for donors to these

organizations. Also, exempted certain operating foundations from the

net investment income tax and reduced the tax to 1 percent for

foundations meeting other requirements.

Revenue Reconciliation Act of 1993 - Imposed a proxy tax on certain

lobbying and political expenditures made by membership organizations.

Tax Payer Bill of Rights 2 (1996) - Introduced intermediate sanction

rules for excess benefit transactions.

Tax Payer Relief Act of 1997 - Revoked tax exemption of certain

organizations providing commercial-type insurance.

Pension Protection Act of 2006 - Required section 501(c)(3)

organizations to make their Forms 990-T available for public inspection.

NOTE: For more extensive information, see Appendix B.

A History of the Tax-Exempt Sector: An SOI Perspective

Statistics of Income Bulletin | Winter 2008

educational purposes, including fraternal beneficiary

associations.” Though the law was declared unconstitutional by the Supreme Court in 1895, the exemption language contained in the act would provide the

cornerstone for tax legislation involving charitable

organizations for the next century.

The Revenue Act of 1909 mirrored and expanded

the language from the 1894 act. Under this statute,

tax exemption was granted to “any corporation or association organized and operated exclusively for religious, charitable, or educational purposes, no part of

the net income of which inures to the benefit of any

private stockholder or individual.” This important

addition set forth the idea that tax-exempt charitable

organizations should be free of private inurement—in

other words, nonprofit.

Ratification of the Sixteenth Amendment granted

Congress the power to levy income tax. The subsequent Revenue Act of 1913 established the modern

Federal income tax system. For charitable organizations, the act used identical language as that found in

the Tariff Acts of 1894 and 1909 with regard to charitable purpose and private inurement.

The Revenue Act of 1917 established, for the

first time, an individual income tax deduction for

contributions made to tax-exempt charitable organizations. This deduction was conceived as a way to

encourage charitable contributions at a time when

income tax rates were rising in order to fund World

War I. One year later, the Revenue Act of 1918

provided that charitable bequests were entitled to a

similar deduction on estate tax returns. Finally, corporations were able to claim the charitable deduction

beginning in 1936.

after December 31, 1950, UBIT was imposed on

the “unrelated business income” (UBI) of charitable

organizations (except churches); labor and agricultural organizations; chambers of commerce, business

leagues, and real estate boards; certain trusts; and

certain title holding companies.7

Income was considered UBI if it was produced

from an activity deemed a “trade or business” that

was “regularly carried on” and was not “substantially

related” to the organization’s exempt purpose(s),

regardless of whether or not the profits from the unrelated trade or business were used solely for exempt

purposes. Passive income and certain gains and

losses from the disposition of property were not subject to tax.

The Revenue Act of 1950 addressed several

other issues regarding the unrelated activities of taxexempt organizations. Tax exemption was no longer

permitted to “feeder” organizations, which did not

conduct any charitable activities, but rather operated commercial enterprises from which they passed

income to a charitable organization. In addition,

income from debt-financed real estate sale-leaseback activities was subject to UBIT. In these cases,

tax-exempt organizations purchased real estate with

borrowed funds, leased the property back to the

owner, and used the tax-free rental income to pay

off the debt.8

The Revenue Act of 1950, and additional changes made under the Tax Reform Act of 1969, discussed in the following section, formed the contemporary structure for the unrelated business taxation of

tax-exempt organizations.

The Revenue Act of 1950

By the 1960s, there was a growing perception among

lawmakers that private foundations, with their small

networks of financers and administrators, were less

accountable to the public than traditional charities.

These concerns were addressed with the Tax Reform

Act of 1969 (TRA69), which introduced sweeping

reforms to the charitable sector. TRA69 also significantly expanded the rules governing unrelated business income taxation of tax-exempt entities.

The first explicit definition of private foundations, for tax purposes, was included in TRA69. This

legislation defined a foundation as a charitable orga-

Before the 1950s, tax-exempt organizations could

earn tax-free income from both mission-related activities and commercial business activities that were unrelated to the purpose for which they were exempt, as

long as they used the net profits for exempt purposes.

However, in the 1940s, concerns grew in Congress

over the perception that tax-exempt organizations

were permitted an unfair competitive advantage over

taxable entities. As a result, Congress established

the “unrelated business income tax” (UBIT) as part

of the Revenue Act of 1950. For tax years beginning

Tax Reform Act of 1969

7 In 1951, Congress extended the UBIT to the unrelated business income of State and municipally owned colleges and universities, to correct for an omission from the 1950 act.

8 Staff report of the Joint Committee on Taxation, “Historical Development and Present Law of Federal Tax Exemption for Charities and Other Tax-Exempt Organizations”

(JCX-29-05) (April 19, 2005).

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A History of the Tax-Exempt Sector: An SOI Perspective

Statistics of Income Bulletin | Winter 2008

nization that did not engage in inherently public activities, test for public safety, receive substantial support from a wide array of public sources, or operate

in support of any organization that met any of these

three requirements.9 Further, the legislation created

two subclasses of private foundations—nonoperating and operating. Nonoperating foundations, which

represented the majority of all private foundations,

were defined as primarily grantmaking organizations.

Conversely, operating foundations were those that

operated charitable programs in a manner similar to

that of public charities.

TRA69 established an array of more stringent

requirements specific to private foundations. These

“private foundation rules” outlined two annual requirements and a variety of “prohibited activities”

that were considered to be contrary to the public interest. First, TRA69 established an annual excise tax

on investment income. This provision was intended

to compel private foundations to “share some of the

burden of paying the cost of government,” particularly the enforcement of regulations related to the

tax-exempt sector.10 Second, nonoperating foundations were required to distribute a minimum amount

for charitable purposes each year. Further, private

foundations that failed to meet the minimum charitable distribution requirement or engaged in certain

prohibited activities were subject to taxes and other

sanctions.

TRA69 also increased the existing charitable

deduction limits for individual donors and sharpened

the definitions of the organizations to which contributions were deductible. Under the Revenue Act of

1964, individuals could deduct contributions made

to public charities up to 30 percent of adjusted gross

income (AGI). The new regulations enacted under

TRA69 increased the maximum deduction limitation

for cash and ordinary income contributions to 50 percent for public charities and operating foundations.

Most nonoperating private foundations remained

subject to a lower 20-percent limitation.11

TRA69 also expanded the tax on unrelated business income, extending the tax to all tax-exempt

organizations described in IRC sections 501(c) and

401(a) (except United States instrumentalities), and

including churches for the first time. Additionally,

TRA69 expanded the taxation of debt-financed income to include forms of income other than rents

from real estate sale-leaseback arrangements.12

Since 1969, Congress has made a number of changes

to the UBIT statutes. However, the rules on unrelated business taxation of tax-exempt organizations

established by the Revenue Act of 1950 and TRA69

have remained largely intact.

Other Legislation, 1970-2007

While the underlying structure of tax exemption for

the charitable and voluntary sector has changed little

since the passage of TRA69, subsequent legislation

has introduced a number of modifications. These

include adjustments to the private foundation net

investment income tax rates and to the excise tax

rates on charitable organizations that engage in prohibited activities. Further changes have provided

new exceptions to UBIT taxation for specified activities, tightened the rules pertaining to the taxation of

payments received from subsidiaries, and required

unrelated business income tax returns filed by IRC

section 501(c)(3) organizations to be made publicly

available.

Overview of the Statistics of Income Exempt

Organization Program

The Internal Revenue Service provides, by Congressional mandate, statistics and microdata derived from

information and tax returns filed with IRS. To fulfill

this requirement, the Statistics of Income (SOI) division has conducted annual studies of organizations

exempt under IRC section 501(c)(3) for every tax

year since 1985.13 Currently, SOI collects information from stratified random samples of Forms 990,

990-PF, 990-T, and the population of Forms 4720.

9 Organizations that conduct “inherently public activities” include churches, schools, hospitals, and Governmental units of the United States.

108

For additional information,

see Richardson, Virginia G. and John Francis Reilly, “Public Charity or Private Foundation Status Issues under 509(a)(1)-(4), 4942(j)(3), and 507, Fiscal Year 2003,” Exempt

Organizations Continuing Professional Education. This article is available at www.irs.gov/pub/irs-tege/eotopicb03.pdf.

10 Staff report of the Joint Committee on Taxation, “General Explanation of the Tax Reform Act of 1969” (JCS-16-70) (December 3, 1970), p. 29.

11 Deduction limitations for cash and ordinary income contributions to nonoperating foundations later were increased to 30 percent of AGI as part of the Deficit Reduction

Act of 1984.

12 TRA69 expanded taxable debt-financed income to include interest, dividends, other rents, royalties, and certain gains and losses from any type of property, if produced

from financial vehicles acquired with borrowed funds.

13 The first SOI exempt organization studies were based on Forms 990 filed by tax-exempt organizations for Tax Years 1943 and 1946. Data from Forms 990-PF filed by

private foundations were first collected for Tax Year 1974.

A History of the Tax-Exempt Sector: An SOI Perspective

Statistics of Income Bulletin | Winter 2008

S

ince 1918, Statistics of Income (SOI) has collected,

compiled, and published

information from tax returns

for its statistical research studies. Over the years, SOI has

made incremental improvements

in data processing methods to

keep pace with technological advances. The relatively small size

of the statistical samples used for

SOI’s exempt organization (EO)

research studies has made these

studies ideal for piloting major

innovations in return processing,

which have been subsequently

adopted by other SOI studies.

The first modern SOI exempt organization study was of

private foundation information

returns, Forms 990-PF, filed for

Tax Year 1974. Abstracting and

Keeping Pace with Technology

editing data from these information returns relied on a tedious

process. First, IRS tax examiners recorded data items from

the returns on preprinted forms,

called edit sheets. Next, data

from these edit sheets were transcribed, read into a mainframe

computer, and subjected to data

quality and consistency tests.

Items that failed the tests were

recorded on paper listings, called

error registers, which were returned to tax examiners. Based

on instructions provided by SOI

analysts, tax examiners made

handwritten corrections on the

listings. These corrections were

transcribed, and the data were

subjected to further testing. The

process was repeated until errors

were no longer present. These

Tax-exempt organizations, other than private

foundations, file Form 990, Return of Organization

Exempt from Income Tax; private foundations file

Form 990-PF, Return of Private Foundation or Section 4947(a)(1) Nonexempt Charitable Trust Treated

as a Private Foundation. Forms 990 and 990-PF are

used by these organizations to report standard financial information, as well as information regarding

compliance with the regulations that govern their taxexemption. Charitable and other types of tax-exempt

organizations report any unrelated business income

and taxes on Form 990-T, Exempt Organization Business Income Tax Return. Private foundations, public

charities, and split-interest and charitable trusts use

Form 4720, Return of Certain Excise Taxes on Charities and Other Persons under Chapters 41 and 42 of

the Internal Revenue Code, to calculate and pay taxes

procedures were quite time-consuming and costly compared to

present-day processing.

The Tax Year 1982 Form

990-PF study was a pilot for

developing a new online, interactive system of editing, testing, and error resolution. With

the new system, tax examiners

keyed return information directly

into a database via computer

screens that were facsimiles of

the Form 990-PF. Failed quality

and consistency tests were communicated to the user at the time

of entry, and corrections were

made and retested immediately.

The online system streamlined

the edit process and improved

production rates, and, eventually,

all SOI studies adopted similar

applications.

continued on page 122

on prohibited activities and, for private foundations,

failure to meet the minimum annual distribution

requirement. SOI produces a variety of statistical

tables and articles annually for all of the tax-exempt

organization programs. Also annually, microdata

files that include all information collected from the

Form 990 and Form 990-PF samples are made available to the public on the IRS Web site, www.irs.

gov/taxstats. Microdata derived from Forms 4720

and the majority of Forms 990-T cannot be disclosed

to the public.14

SOI samples approximately 10 percent of all

Forms 990 and 990-PF, and about 20 percent of all

Forms 990-T filed for a given tax year.15 For any

designated tax year, tax-exempt organizations have

various 12-month fiscal periods that collectively span

2 calendar years. To ensure complete coverage of a

14 Under the Pension Protection Act of 2006, IRC section 501(c)(3) public charities and private foundations reporting unrelated business income were required to make their

Forms 990-T, Exempt Organization Business Income Tax Returns, available for public inspection. However, IRS was not authorized under the Pension Act to disclose this

information to the public. The Tax Technical Corrections Act of 2007 corrected for this oversight and authorized IRS to disclose Form 990-T information reported by section 501(c)(3) organizations, retroactive to returns filed after August 17, 2006, the date of enactment of the Pension Act.

15 For detailed information on Statistics of Income sampling methodology for producing population estimates, see the general Appendix, located near the back of this issue

of the SOI Bulletin.

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A History of the Tax-Exempt Sector: An SOI Perspective

Statistics of Income Bulletin | Winter 2008

single tax year, SOI draws samples of Form 990-series returns over a 2-year timeframe. For example,

the Tax Year 2004 studies include returns filed for

Tax Year 2004 in Calendar Years 2005 and 2006.

The SOI study of Forms 4720 includes data collected

for the population of Forms 4720 filed over a calendar year, which may include various tax years.

The SOI files contain most financial items from

each return, as well as a number of additional fields

dedicated to information about the organizations’

structures and activities. The SOI staff enter data

into an online system, which identifies filer and other

errors that are corrected during the data entry process. Often, supplemental information is included on

schedules and other attachments. Where appropriate,

information from these attachments is used to adjust

or supplement data reported by the filer.

The following sections provide highlights of

historical data for charitable and other tax-exempt

organizations based on the information and tax

returns they filed. The data represent every year

for which continuous SOI data are available. This

includes Tax Years 1985 through 2004 for public

charities and private foundations, filing Forms 990,

and 990-PF, respectively. For organizations that file

the Form 990-T, data are presented for Tax Years

1990 through 2004. Data are also shown for excise

taxes reported on Forms 4720 for Calendar Years

2003 through 2006.

Public Charity and Private Foundation

Historical Data, 1985-2004

The charitable sector, comprising both public charities and private foundations exempt from income

tax under IRC section 501(c)(3), is a substantial and

growing portion of the overall economy. The aggregate book value of assets, as reported by charitable

organizations that filed IRS information returns

for Tax Year 2004, was $2.5 trillion, a real increase

of 222 percent over the total reported for Tax Year

1985.16 These organizations also reported 171 percent more revenue for Tax Year 2004 than for Tax

Year 1985. Public charities and private foundations

directed much of this additional revenue into charitable expenditures such as program service activities

T

he Seattle-based Bill and Melinda Gates

Foundation, currently the largest foundation in the world, was founded in Tax Year

1999 with an initial endowment of $15.8 billion.

By Tax Year 2004, the foundation’s assets were

valued at $28.8 billion, or nearly 6 percent of the

aggregate fair market value of total assets held

by all private foundations. The $1.3 billion in

contributions, gifts, and grants that the foundation distributed in Tax Year 2004 represented

4 percent of the aggregate amount of contributions, gifts, and grants distributed by all private

foundations for the year.

and grants. Total charitable expenditures reported

by these organizations for Tax Year 2004 were 182

percent larger than those reported for Tax Year

1985 and experienced a real annual rate of growth

of nearly 6 percent.17 In contrast, Gross Domestic

Product grew at a real annual rate of 3 percent over

the period.18 Figure B shows the cumulative growth

in charitable expenditures and GDP for Tax Years

1985 through 2004.

Public Charities

Public charities filed over 276,000 information returns for Tax Year 2004. These organizations held

more than $2.0 trillion in assets and reported nearly

$1.2 trillion in revenue, 70 percent of which came

from program services. The statistics reported in

this section are based on data compiled from Form

990 and Form 990-EZ, the short form version of the

information return that may be completed by smaller

organizations.

In order to qualify for tax-exempt status, an organization must show that its purpose serves the public

good, as opposed to a private interest. The activities

of public charities are limited in that they must further one or more of the purposes for which they were

granted tax-exempt status. Organizations that are

exempt under IRC section 501(c)(3) are those whose

purposes are religious, charitable, scientific, literary,

or educational. In practice, these categories cover

a broad range of activities. Examples of the varied

16 Data presented in constant dollars were adjusted based on the chain-type price index for Gross Domestic Product as reported by the U.S. Department of Commerce,

110

Bureau of Economic Analysis (BEA). Tax Year 2004 is used as the base year for these adjustments. The indexes are available from BEA’s Web site, www.bea.gov.

17 For purposes of analysis, “charitable expenditures” are defined as the sum of program service expenses from Form 990 and disbursements for charitable purposes from

Form 990-PF.

18 Growth rates were derived from the exponential formula for growth, y=b*m x.

A History of the Tax-Exempt Sector: An SOI Perspective

Statistics of Income Bulletin | Winter 2008

Figure B

Figure B

Real Growth in Gross Domestic Product and Charitable Expenditures, Cumulative Percentage, Tax Years

1985-2004

Percentage growth since 1985

120%

107%

100%

Charitable Expenditures [1]

80%

58%

60%

40%

GDP

20%

0%

1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Tax year

[1] Charitable expenditures are defined as the sum of program service expenses from Form 990 and charitable expenses (disbursements for charitable purposes) from Form 990-PF. Public

charity data exclude Form 990-EZ filers, most organizations with gross receipts less than $25,000 in current dollars, as well as most churches, and certain other religious organizations.

NOTE: Data were adjusted based on the chain-type price index for Gross Domestic Product as reported by the U.S. Department of Commerce, Bureau of Economic Analysis. Tax Year 2004

is used as the base year for these adjustments.

exempt purposes of these public charities include

nonprofit hospitals, educational institutions, youth

organizations, community fundraising campaigns,

local housing organizations, historical societies, and

environmental preservation groups.

The universe of public charities has changed dramatically over the past 2 decades. Figure C shows

that, in 1985, the IRS Master File listed approximately 335,000 active public charities, tax-exempt

under IRC section 501(c)(3). By 2004, this number

had nearly tripled to 933,000. Not all public charities

are included in this figure because most churches and

certain other religious organizations need not apply

for recognition of tax exemption, unless they specifically request an IRS ruling.

Of the public charities on the IRS Master File,

only a fraction must report financial data to the IRS.

In addition to churches, organizations with gross

receipts less than $25,000 are not required to file

annual Forms 990 or 990-EZ. Public charities filed

276,191 information returns with the IRS for Tax

Year 2004, 159 percent more than for Tax Year 1985.

The difference between the number of active public

charities on the IRS Master File and those that filed

information returns for Tax Years 1985 through 2004

is illustrated in Figure C.

Public Charity Growth

The 20-year period between Tax Years 1985 and 2004

was one of significant and steady growth for IRC section 501(c)(3) public charities. Figure D shows that,

with one notable exception, all of the major financial

categories on Forms 990 and 990-EZ—total assets,

total liabilities, total revenue, and total expenses—

increased in real terms in each of the years during this

period. The lone decrease, between Tax Years 1997

and 1998, can be attributed to the absence of Teachers Insurance and Annuity Association of America

(TIAA) and College Retirement Equities Fund

(CREF), two very large teachers’ pension organizations that lost their tax exemption as a result of the

Taxpayer Relief Act of 1997.

For the most part, components of the major

financial categories featured in Figure D also showed

steady increases over the 20-year period. Table 2,

located at the end of this article, shows that the two

major sources of revenue for public charities—

program service revenue and contributions, gifts, and

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A History of the Tax-Exempt Sector: An SOI Perspective

Statistics of Income Bulletin | Winter 2008

Figure C of Active Section 501(c)(3) Public Charities on the IRS Master File, Tax Years 1985-2004

Number

1,000,000

900,000

Public charities filing Forms 990 and 990-EZ

800,000

Nonfilers [1]

700,000

600,000

500,000

400,000

300,000

200,000

100,000

0

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2003

Tax year

[1] Nonfilers include organizations on the IRS Master file with gross receipts below the $25,000 filing threshold, churches and certain other religious organizations which are not required

to file, as well as noncompliant organizations.

NOTE: The number of organizations on the IRS Master File figure was supplied by IRS Tax Exempt Government Entities and does not include private foundations which are required to

file Forms 990-PF. The number of organizations filing Forms 990 and 990-EZ are SOI estimates based on samples.

Figure D

Public Charity Growth, Selected Financial Items, in Constant Dollars, Tax Years 1985-2004

$ Trillions

2.5

2.0

Total assets

1.5

1.0

Total revenue

Total expenses

0.5

Total liabilities

0.0

1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Tax year

112

NOTES: Data are from Forms 990 (and, beginning with Tax Year 1989, Forms 990-EZ) for nonprofit charitable organizations that are tax-exempt under Internal Revenue Code section

501(c)(3) and exclude private foundations, most organizations with receipts less than $25,000 in current dollars, as well as most churches, and certain other types of religious organizations.

Data were adjusted based on the chain-type price index for Gross Domestic Product as reported by the U.S. Department of Commerce, Bureau of Economic Analysis. Tax Year 2004 is

used as the base year for these adjustments.

A History of the Tax-Exempt Sector: An SOI Perspective

Statistics of Income Bulletin | Winter 2008

grants—increased, in real terms, between each of Tax

Years 1985 through 2004. However, other components of revenue were more volatile. For example,

investment income, which includes interest from

short-term investments and dividends and interest

from securities, showed a net increase of 27 percent

over the 20-year period, despite a decline of 38 percent between Tax Years 1999 and 2002.

Even though they are considered nonprofit, public charities use net income, the difference between

total revenue and total expenses, to expand future

programs and increase endowments. Total revenue

reported by public charities exceeded total expenses

for each tax year between 1985 and 2004, resulting

in annual amounts of positive net income. However,

unlike other financial variables, net income did not

increase steadily over this period. The highest aggregate real net income was reported for Tax Year 1999,

over $96 billion. This was followed by a 3-year period in which total expenses increased at a rate faster

than total revenue. The result was a 20-year low for

aggregate net income: less than $22 billion for Tax

Year 2002.

Table 2 at the end of this article presents selected

data, in both current and constant dollars, from

Forms 990 and 990-EZ filed by public charities for

Tax Years 1985 and 2004. Total assets held by these

public charities grew, in real terms, by 210 percent,

from $665.0 billion in 1985 to $2.1 trillion in 2004.

Total revenue and total expenses showed similar

trends over the 20-period, with real increases of 174

percent and 176 percent, respectively

The Top Ten Public Charities

Figure E shows the top ten public charities, in terms

of total assets, for Tax Years 1985 and 2004. For

Tax Year 1985 the top ten organizations reported

$107.7 billion in assets. This figure represented over

16 percent of the total assets reported by all IRC

section 501(c)(3) public charities for that year. By

a significant margin, the largest two organizations

for Tax Year 1985 were TIAA and CREF, reporting

$36.3 billion and $37.9 billion in assets, respectively,

a combined 11 percent of total assets. The remaining

organizations include nonprofit hospitals and universities, as well as Commonfund, an organization that

manages nonprofit endowments. The top ten for Tax

Year 2004 includes many of the same organizations

on the 1985 list, with the notable exception of TIAA

and CREF, which were no longer tax-exempt. These

ten organizations reported $183.4 billion in assets,

or 9 percent of the total of all reporting organizations

for Tax Year 2004.19

Private Foundation Growth

Tax Years 1985 through 2004 also represented a

period of significant growth for the private foundation segment of the tax-exempt sector. The wealth

realized during the technological revolution of the

mid-to-late 1990s was used by a number of philan-

Figure E

Top Ten Public Charities, by Size of Total Assets, in Constant Dollars, Tax Years 1985 and 2004

[All figures are shown in billions of constant 2004 dollars]

1985

Organization

CREF

TIAA

Harvard University

Yale University

Stanford University

Columbia University

Princeton University

Kaiser Foundation Hospitals

Cornell University

Commonfund

Assets

37.9

36.4

8.4

4.6

4.5

3.4

3.3

3.2

3.1

3.0

2004

Organization

Harvard University

Stanford University

Yale University

Howard Hughes Medical Institute

Commonfund

Princeton University

Kaiser Foundation Hospitals

Massachusetts Institute of Technology

Shriner's Hospital for Children

Columbia University

Assets

55.3

19.0

18.3

16.7

16.6

13.3

13.1

10.9

9.3

8.8

NOTES: Data are from Forms 990 for nonprofit charitable organizations that are tax-exempt under Internal Revenue Code section 501(c)(3) and exclude private foundations. Data

were adjusted based on the chain-type price index for Gross Domestic Product as reported by the U.S. Department of Commerce, Bureau of Economic Analysis. Tax Year 2004 is

used as the base year for these adjustments.

19 When TIAA and CREF are excluded from the data for Tax Year 1985, the assets of the revised top ten, which included Emory and Vanderbilt Universities, accounted for

$38.9 billion, or 7 percent of the total.

113

A History of the Tax-Exempt Sector: An SOI Perspective

Statistics of Income Bulletin | Winter 2008

thropists to establish and fund new foundations. Additionally, flourishing investment markets benefited

existing foundations, particularly those with diverse

and sizeable portfolios. This prosperity led to a period of substantially increased giving levels.

Between Tax Years 1985 and 2004, real growth

in foundation assets and giving outpaced the number

of new foundations that entered the charitable sector.

Figure F shows the percentage change in the number

of returns filed, fair market value of total assets, and

grants paid for each year in the period.20 The number of private foundations increased substantially,

more than doubling between 1985 and 2004. While

31,170 private foundations filed Forms 990-PF for

Tax Year 1985, the number of returns filed for Tax

Year 2004 was 76,897. The number of new foundations entering the sector grew at the highest rates in

Tax Years 1986 and 1999. In 1986, nearly 13 percent

more foundations filed Forms 990-PF than for 1985.

This increase likely reflected the adoption of several

provisions, enacted under the Deficit Reduction Act

of 1984 (DEFRA), which allowed more favorable tax

treatment for donations to private nonoperating foundations. One provision introduced in DEFRA, which

permitted contributors to deduct the full fair market,

rather than a reduced value, for donations of certain

appreciated stock to nonoperating private foundations, expired in 1994, but was frequently extended

until its permanent adoption under the Tax and Trade

Relief Extension Act of 1998. Due in part to the

economic growth of the mid and late-1990s and, perhaps to some extent, the adoption of the permanent

provision for donations of certain appreciated stock,

the largest number of new foundations was recorded

for Tax Year 1999, when the number of new filers

increased by 11 percent from 1998. Meanwhile, the

fair market value of total assets more than tripled

over the 20-year period. Asset values grew at their

highest rates, 15 percent or more, annually, between

Tax Years 1995 and 1999, before declining between

Tax Years 2000 and 2002. Growth in foundation

giving, as measured by grants paid by private foun-

Figure F

Domestic Private Foundations: Growth in Number of Returns Filed, and Real Growth in Fair Market

Value of Total Assets, and Grants Paid, Cumulative Percentages, Tax Years 1985-2004

Percentage growth since 1985

300

250

Fair market value

of total assets

200

Grants paid

150

100

Number of returns

50

0

1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Tax year

NOTE: Data were adjusted based on the chain-type price index for Gross Domestic Product as reported by the U.S. Department of Commerce, Bureau of Economic Analysis.

Tax Year 2004 is used as the base year for these adjustments.

114

20 Data used in these analyses are for domestic private foundations and exclude Forms 990-PF filed by foundations that were organized outside of the United States.

A History of the Tax-Exempt Sector: An SOI Perspective

Statistics of Income Bulletin | Winter 2008

dations for charitable purposes, nearly mirrored that

of assets, also more than tripling over the 20-year

period. Tax Years 1996 through 2000 represented the

period of the largest growth in grants paid over the

20-year period.

Foundation Giving

Figure G shows the aggregate values of total charitable expenses and their components, in constant

dollars, that private foundations reported for Tax

Years 1985-2004. Total charitable expenses included

grants paid, as well as operating and administrative

expenses. Total charitable expenses increased from

$9.7 billion, in constant dollars, to $32.1 billon over

the 20-year period. Total charitable expenses experienced double-digit increases in each of Tax Years

1996-2000, growing at a real annual rate of 15 percent over the 5-year period. The real value of these

expenses peaked in Tax Year 2000 before leveling off

between Tax Years 2001 and 2004.

To further their charitable purposes, most private foundations pay grants to charities that operate

charitable programs. Grants paid were the largest

component of charitable expenditures, representing

84 percent or more of total charitable expenses for

each of Tax Years 1985-2004. The aggregate amount

of grants paid by private foundations was more than

three times larger for Tax Year 2004 than for Tax

Year 1985. Like total charitable expenses, the real

value of grants paid peaked between Tax Years 1996

and 2000; the real annual growth rate for the 5-year

period was 16 percent. Giving for the typical foundation, as measured by the median value of grants

paid, also increased, in real terms, over the 20-year

period, from $14,130 in Tax Year 1985 to $24,375 in

Tax Year 2004.

Foundation Investments and Income

Foundations financed charitable giving primarily

with income derived from assets, particularly investment assets, over the 20-year period. The real fair

market value of foundations’ total investments more

than tripled between Tax Years 1985 and 2004, growing from $137.8 billion in Tax Year 1985 to $481.2

billion in Tax Year 2004 (see Figure H). Similarly,

the median fair market value of investments held

Figure G

Domestic Private Foundations: Charitable Expenses and Components, in Constant Dollars, Tax Years

1985-2004

$ Billions

35

34.9

32.1

30.2

30

27.6

Total charitable expenses

25

Grants paid

20

17.1

15

10

5

13.5

9.7

11.5

Operating and administrative expenses

8.1

1.6

14.6

2.0

4.7

4.5

2.6

0

1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Tax year

NOTE: Data were adjusted based on the chain-type price index for Gross Domestic Product as reported by the U.S. Department of Commerce, Bureau of Economic Analysis. Tax Year 2004

is used as the base year for these adjustments.

115

A History of the Tax-Exempt Sector: An SOI Perspective

Statistics of Income Bulletin | Winter 2008

Figure H

Domestic Private Foundations: Investment Assets, Revenue, Net Investment Income, and Excise Tax

on Net Investment Income, in Constant Dollars, Tax Years 1985 and 2004

[Money amounts are in thousands of dollars]

Item

Tax Year

1985

Tax Year

2004

Real annual rate

of growth [1]

Percentage

change

(1)

(2)

(3)

(4)

Total investment assets

137,777

481,177

6.8

249.2

Total revenue

25,423

58,668

4.5

130.8

Net investment income

15,692

34,019

4.2

116.8

263

469

3.1

78.1

Excise tax on net investment income

[1] Growth rates were derived from the exponential formula for growth y=b*m x.

NOTE: Data were adjusted based on the chain-type price index for Gross Domestic Product as reported by the U.S. Department of Commerce, Bureau of Economic Analysis.

Tax Year 2004 is used as the base year for these adjustments.

by private foundations more than doubled over the

period, growing from $159,349 in Tax Year 1985 to

$333,798 in Tax Year 2004. Investment growth was

most pronounced in Tax Years 1995 through 1999,

when real investment values grew by more than 15

percent, annually.

Net investment income is the realized income

that private foundations receive from their investments. In accordance with the regulations enacted

under TRA69, private foundations pay an annual

tax on this amount. For most domestic foundations,

the tax equals 2 percent of net investment income.21

Net investment income more than doubled, in real

terms, between Tax Years 1985 and 2004, increasing

from $15.7 billion to $34.0 billion during the period.

The associated tax on net investment income also

increased, but at a slower rate, growing from $263.1

million in Tax Year 1985 to $468.7 million in 2004.

Net investment income and the associated tax reached

their highest levels in Tax Year 1999, when they

equaled $63.9 billion and $816.0 million, respectively.

Private Foundations’ Excise Taxes 2003-2006

The “private foundation rules” outlined in TRA69

prohibit private foundations from engaging in “selfdealing,” which is defined as conducting activities

that benefit foundation managers, officers, substantial contributors, and other foundation “insiders.”

Foundations are also prohibited from holding excess

interests in a business enterprise, investing in a manner that jeopardizes their charitable purpose, or making “taxable expenditures,” which include grants to

21 Two reductions for the net investment income tax are available.

116

most noncharitable entities, outlays for lobbying and

political activities, and other expenditures that are

inconsistent with a foundation’s charitable purpose.

Private foundations, other charitable organizations,

and individuals that engage in prohibited activities or

private foundations that fail to meet the annual minimum charitable distribution requirement are required

to pay a penalty excise tax on the amount of money

involved using Form 4720.

Initial tax rates and tax limits for excise taxes

remained constant from 2003 to 2006. Taxes on

self-dealing can be imposed on both self-dealers and

foundation managers. Acts of self-dealing are taxed

at 5 percent of the amount involved for self-dealers,

and managers pay 2.5 percent, up to a maximum

of $10,000. There is a 10-percent tax imposed on

private foundations that make taxable expenditures,

while foundation managers pay 2.5 percent up to a

maximum of $2,500. Foundations that fail to distribute a minimum amount for charitable purposes are

taxed at 15 percent of the undistributed amount. Excess business holdings that are not disposed of within

90 days are taxed at a rate of 5 percent of the taxable

amount of excess business holdings. For tax years

beginning after August 17, 2006, the Pension Protection Act has doubled the rates and amounts of these

excise taxes.

For Calendar Year 2006, private foundations

reported $5.3 million in total tax liability on Form

4720, and tax on undistributed income accounted

for nearly $3 million.22 Figures I and J show that,

between Calendar Years 2003 and 2006, taxes on

First, foundations that demonstrate growth in their charitable giving may be eligible for a reduced 1-percent tax

rate. Second, operating foundations that meet certain requirements outlined in IRC section 4940 are eligible for a total exemption from the excise tax.

22 Data in this section represent information from Forms 4720 filed by organizations that identified themselves as Form 990-PF filers. Data for Form 990-PF filers that filed

Form 4720 generally represent private foundations, but include information reported by nonexempt charitable trusts that are treated as private foundations for tax purposes.

A History of the Tax-Exempt Sector: An SOI Perspective

Statistics of Income Bulletin | Winter 2008

Figure I

Forms 4720 Filed by Private Foundations, by Taxable Activity, Calendar Years 2003-2006

Percentage

100

90

80

70

60

50

40

30

20

10

0

2003

2004

Calendar year

2005

Self-dealing

Undistributed income

Taxable expenditures

Excess business holdings

2006

NOTE: Data represent information from Forms 4720 filed by organizations or associated individuals who identified themselves as Form 990-PF filers. These data generally

represent private foundations and associated individuals, but include information reported by nonexempt charitable trusts that are treated as private foundations for tax purposes.

Figure J

Tax Reported by Private Foundations on Form 4720, by Tax Type, Calendar Years 2003-2006

Percentage

100

90

80

70

60

50

40

30

20

10

0

2003

2004

Calendar year

2005

Self-dealing

Undistributed income

Taxable expenditures

Excess business holdings

2006

NOTE: Data represent information from Forms 4720 filed by organizations or associated individuals who identified themselves as Form 990-PF filers. These data generally

represent private foundations and associated individuals, but include information reported by nonexempt charitable trusts that are treated as private foundations for tax purposes.

117

A History of the Tax-Exempt Sector: An SOI Perspective

Statistics of Income Bulletin | Winter 2008

undistributed income accounted for the majority of

total taxes reported on Form 4720 and were the most

frequently reported excise tax. From 2003 to 2006,

undistributed income fell from $3.5 million to $3 million. The number of filers fell slightly from 1,549

in 2003 to 1,529 in 2006. In 2003, undistributed income accounted for nearly 80 percent of total excise

tax reported and 90 percent of filings. By 2006, tax

reported for undistributed income accounted for only

56 percent of total excise tax reported. The change in

undistributed income as a percentage of total excise

tax was a result of a rise in self-dealing taxes reported.

In 2003, self-dealing accounted for $400,000 of

the $4.1 million total of reported excise taxes. By

2006, the amount had increased to $2.1 million of the

$5.3 million total. As a percentage of total excise tax

reported, self-dealing quadrupled from 10 percent to

40 percent. A small number of filers were responsible for this increase. From 2003 to 2006, the median

tax on self-dealing actually fell. The number of filers

increased from 119 in 2003 to 159 in 2006, although,

as a percentage of total filings, self-dealing increased

less than a single percentage point each year from

2003 to 2006.

Unrelated Business Income Taxation of

Exempt Entities

Tax-exempt organizations may enter into a wide

range of tax-free commercial activities, as long as the

activities are substantially related to their tax-exempt

missions; however, income from unrelated business

activities is taxable. Exempt-organization business

income taxation was designed to place the unrelated

activities of exempt organizations on an equal footing

with similar activities carried out by taxable entities. Organizations that are described in IRC sections

501(c)(2)-(27), as well as certain other types of taxexempt organizations, must file a Form 990-T if they

received $1,000 or more of gross income from business activities that were considered unrelated to the

purposes for which they received tax-exempt status.23

Unrelated Business Income and Tax Historical Data,

1990-2004

During the 15-year period encompassing Tax Years

1990-2004, gross unrelated business income (UBI)

of tax-exempt organizations increased overall, in

constant dollars, but with periods of decline from

1990 to 1991 and 2000 to 2001. In real terms, the

associated aggregate unrelated business income tax

(UBIT) of $364.6 million reported by these organizations for 2004 was nearly three times more than the

amount reported for 1990. However, between 1990

and 2004, there were periods of erratic swings in annual amounts of UBIT reported. Figures K and L

present data for UBI and UBIT, grouping filers into

two broad categories, tax-exempt corporations and

tax-exempt trusts.24

Historically, exempt corporations have represented the majority of Form 990-T filers, accounting

for large percentages of total gross UBI amounts

reported annually. For 2004, for example, corporate

entities made up 85 percent of the Form 990-T filing population and reported nearly 90 percent of

total gross UBI. Exempt trusts, despite being much

smaller in number and annual shares of total gross

UBI reported on Form 990-T, had UBIT exceeding

that of corporations for several of the years in the

1990-2004 period.

As a group, tax-exempt trust filers generally

comprise pension, profit-sharing, and stock bonus

plans; traditional Individual Retirement Arrangements; and voluntary employees’ beneficiary associations, all of which typically report investments as

their primary source of UBI. For 2004, these three

types of organizations accounted for 91 percent of

all tax-exempt trust Form 990-T filers. Because a

high percentage of tax-exempt trust filers engage

primarily in unrelated investment activities, yearto-year changes in time-series data for trust UBI

and UBIT appear to closely track financial market

performance, rising and falling in tandem with

market fluctuations.25 In addition, because most of

23 See Appendix A for additional information on the types of organizations exempt under section 501(c).

118

In addition to the organizations described under sections

501(c)(2)-(27), Archer medical savings accounts, exempt under section 220(e); qualified pension, profit-sharing, or stock bonus plans, exempt under section 401(a);

traditional and Roth Individual Retirement Arrangements, exempt under sections 408(e) and 408A, respectively; State-sponsored health plans, exempt under section 529(a);

and Coverdell education savings accounts, exempt under section 530(a), are also subject to unrelated business income taxation and must file Form 990-T to report gross

income from business activities of $1,000 or more.

24 “Outliers,” returns which contained unique characteristics that were considered anomalous to the general population of returns filed for a given year, or returns that contained

very large dollar amounts and were not filed consistently over the 15-year period, have been excluded from Figures K and L and are not taken into consideration in the historical

analyses presented in this section. In all, there were nine tax-exempt entities that filed at least one return during the 1990-2004 period that was considered to be an outlier. While

excluded from the gross UBI and UBIT time series shown in these figures, they are included in the data presented in Tables 6 and 7 at the end of this article.

25 The Wilshire 5000 Total Market Index and Standard and Poor (S&P) 500 pricing information were used for analyzing possible effects of financial markets on unrelated

business taxable income and tax. The Wilshire index can be accessed from www.wilshire.com/quote.html. Historical S&P 500 pricing information can be accessed from

www.finance/yahoo.com.

A History of the Tax-Exempt Sector: An SOI Perspective

Statistics of Income Bulletin | Winter 2008

their UBI is from investments, tax-exempt trusts

were more limited than most exempt corporations in

both the types and amounts of deductions they could

claim to offset income, meaning that the proportion

of an exempt trust’s UBI that is taxable is usually

higher than that for corporations. Moreover, from

1990 to 2000, trust income was subject to higher

marginal tax rates than UBI earned by corporate exempt entities.26

Groups of tax-exempt organizations with typically high concentrations of corporate entities include

charitable organizations; civic leagues and social

welfare organizations; labor, agricultural, and horticultural organizations; business leagues, chambers of

commerce, and real estate boards; recreational and

social clubs; and veterans’ organizations. Within

each of these groups, the percentage of corporate

filers ranged from 97 percent for charities to 100 percent for veterans’ organizations.

Figure K shows that, overall, gross UBI increased, in constant dollars, almost every year be-

tween 1990 and 2004, growing 117 percent over

the 15-year period. Similarly, gross UBI reported

by tax-exempt corporations, which contributed the

majority of the total, experienced fairly consistent

year-to-year growth, also increasing 117 percent between 1990 and 2004. In contrast, tax-exempt trusts

consistently reported much smaller annual amounts

of gross UBI. While the overall increase in exempt

trust UBI between 1990 and 2004 was 121 percent,

annual amounts were much more volatile, primarily

due to fluctuations in investment markets.

Although the amount of aggregate gross UBI

reported by tax-exempt organizations increased at a

relatively stable rate between 1990 and 2004, the annual UBIT liability amounts shown in Figure L were

much more variable.27 While the total constant-dollar amount of UBIT reported for Tax Year 2004 was

212 percent higher than that reported for 1990, UBIT

actually exceeded the 2004 amount for several of

the intervening years. In addition, although exempt

corporations consistently reported more gross UBI

Figure K

Gross Unrelated Business Income (UBI), in Constant 2004 Dollars, Tax Years 1990-2004

Gross UBI ($ billions)

10

All filers

8

Exempt corporation filers

6

4

2

Exempt trust filers

0

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

Tax year

NOTE; Data were adjusted based on the chain-type price index for Gross Domestic Product as reported by the U.S. Department of Commerce, Bureau of Economic Analysis.

Tax Year 2004 is used as the base year for these adjustments.

26 The unrelated business income tax was determined based on the regular corporate or trust income tax rates in effect for an organization’s tax year.

Corporate and trust

tax-rate schedules are provided each year in the Form 990-T return instructions.

27 The amount of total tax liability originally reported on Forms 990-T, as stated in these statistics, may not necessarily be the amount ultimately paid to the Internal

Revenue Service (IRS). Changes in tax liability assessments can be made after the original return is filed, either by the taxpayer on an amended return, by the IRS after

examination, or by rulings of the U.S. tax courts after litigation.

119

A History of the Tax-Exempt Sector: An SOI Perspective

Statistics of Income Bulletin | Winter 2008

than exempt trusts, this pattern did not hold for UBIT

reported by these two types of entities. Corporate

UBIT exceeded trust UBIT for the years 1990-1992

and 2000-2004, but trust UBIT was greater from

1993-1999.

Sharp declines in UBIT, in real terms, occurred

for Tax Years 1998 and 2001 for all types of organizations shown in Figure L, reflecting a number of

factors, primarily volatility in financial markets. Between 1997 and 1998, tax-exempt corporations and

trusts both reported aggregate total deductions that

increased at rates higher than those at which aggregate gross UBI increased. Further, real capital gain

net income (less loss) decreased during the period

by 31 percent for tax-exempt corporations and 16

percent for tax-exempt trusts. This contributed to

respective declines in tax-exempt corporate and trust

UBIT of 11 percent and 21 percent. Due, in part,

to an overall decline in gross UBI, the amount of

reported UBIT dropped even more sharply between

2000 and 2001, one of only three annual periods

of decline in UBI shown in Figure K. Three major

slides in stock prices from late 2000 through September of 2001 may have contributed to a drop in

capital gain net income (less loss) of 77 percent for

exempt corporations and 52 percent for exempt trusts

between Tax Years 2000 and 2001. Overall, UBI declined 3 percent for tax-exempt corporations between

2000 and 2001, while deductions increased by 1 percent; trust UBI and deductions fell by 39 percent and

26 percent, respectively. In addition, marginal tax

rates applicable to the income of tax-exempt trusts

were reduced for 2001, effectively lowering the

UBIT of these organizations.

Between 2003 and 2004 the real value of UBIT

of all types of organizations shown in Figure L rose

steeply, increasing by 59 percent for tax-exempt

corporations and 54 percent for tax-exempt trusts.

Relatively stable growth in equity prices between

2003 and 2004 likely contributed to increases in

capital gain net income (less loss) and combined

income from partnerships and S corporations reported by both types of organizations between these

years. For tax-exempt corporations, capital gain

net income (less loss) increased 105 percent, while

combined partnership and S corporation income

increased 111 percent. Together, these sources of

income accounted for 6 percent of corporate total

Figure L

Unrelated Business Income Tax (UBIT), in Constant Dollars, Tax Years 1990-2004

UBIT ($ millions)

450

375

All filers

300

Exempt trust filers

225

150

Exempt corporation filers

75

0

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

Tax year

120

NOTE: Data were adjusted based on the chain-type price index for Gross Domestic Product as reported by the U.S. Department of Commerce, Bureau of Economic Analysis.

Tax Year 2004 is used as the base year for these adjustments.

A History of the Tax-Exempt Sector: An SOI Perspective

Statistics of Income Bulletin | Winter 2008

UBI for 2004. For tax exempt trusts, capital gain

net income (less loss) and combined partnership and

S corporation income increased 123 percent and 48

percent, respectively, and together accounted for 38

percent of trust gross UBI.

period, however, these charities offset gross UBI

with sizable deductions, resulting in much smaller

amounts of taxable income. The share of total unrelated business income tax reported by charitable organizations increased over the period, and exceeded

45 percent of overall UBIT liability for each of Tax

Years 2002-2004. For 2004, these organizations

were liable for more than half of the UBIT reported

by all Form 990-T filers. Of those charities that

filed Form 990-T for 2004, the majority, 97 percent,

were organized as corporations. These corporate

charitable organizations represented 37 percent of

all tax-exempt corporate entities filing Form 990-T

for that year.

Internal Revenue Code Section 501(c)(3) Charitable

Organizations

IRC section 501(c)(3) charitable organizations, including public charities and private foundations,

generally command more public interest than any

other type of organization granted exemption from

Federal income tax by the IRS. Compared to other

types of Form 990-T filers, classified by IRC section, charitable organizations were responsible for

the single largest proportions of gross UBI reported

each year from 1990 to 2004. As illustrated by Figure M, in which outliers have been removed, these

organizations consistently made up between 25 percent and 35 percent of all 990-T filers and accounted

for more than half of the reported amount of gross

UBI almost every year. Throughout the 15-year

Conclusion

Voluntary charitable and member-serving organizations have flourished in the United States since the

country’s genesis. In the early 20th century, legislation that established the modern income tax system

and concurrently granted tax-exempt status to certain organizations codified the relationship between

Figure M

Percentage of Selected Unrelated Business Financial Items Attributable to Internal Revenue Code

Section 501(c)(3) Charitable Organizations, Tax Years 1990-2004

Percentage

70

60

50

40

30

20

10

0

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

Tax year

Number of returns

Gross unrelated business income

Unrelated business taxable income

Unrelated business income tax

121

A History of the Tax-Exempt Sector: An SOI Perspective

Statistics of Income Bulletin | Winter 2008

the tax-exempt sector and Government. Later, a

variety of additional legislation placed important restrictions on tax-exempt organizations, including the

taxation of unrelated business income of tax-exempt

organizations and the application of more stringent

tax regulations to private foundations.

Today, the legislation enacted between 1917

and 1969 remain the cornerstone of tax exemption

in the United States. However, the tax-exempt sector has grown substantially over the past 2 decades,

from page 109

and SOI’s datasets have tracked and described this

growth. The activities of tax-exempt organizations

have also broadened, and new types of tax-exempt

organizations have emerged. Congress frequently

has updated the tax code to reflect this growth and

evolution, and the SOI datasets have been a vital tool

for policymakers and researchers to measure growth

and examine emerging trends throughout the taxexempt sector, as well as assess the role and impact

of the Nation’s tax-exempt organizations.

Keeping Pace with Technology—Continued

An online data quality review system was introduced for

the Form 990 Study for Tax Year

1991. This system, which is still

used today, selected an automated, random sample of a tax

examiner’s completed returns

for input by a second tax examiner. It produced a computerized comparison of the original

and second versions and a listing

of any of discrepancies between

the two. After review, a supervisor provided guidance to the

tax examiners, and the errors

were corrected.

The Tax Year 1999 Form

990-PF study was used as one

of the pilots for upgrading the

original online editing system

to a mouse-driven, graphical

user interface (GUI) for navigating through data entry screens.

Prior to this upgrade, onscreen

navigation was accomplished

using the keyboard, with tax

examiners forced to navigate

through edit screens one item at

a time. Because the new GUI

system allowed faster naviga-

tion through edit screens, it

improved user satisfaction and

increased production rates of

tax examiners, and other SOI

projects quickly adopted the

technology.

A further advancement to

SOI edit systems involved the

use of digital images created

from paper-filed returns. This

upgrade was piloted for the Tax

Year 2002 Form 990-PF study.

Using wide-aspect computer

monitors, the data entry forms

were displayed on one side of

the screen, and a digital image of the return was displayed

on the other. This split-screen

method of return processing,

which has been well-received

by the tax examiners, has significantly reduced resource

costs associated with the retrieving, controlling, and handling of paper returns.

The advent of electronically

filed returns prompted the latest

technological innovation

adopted by EO edit systems.

Since Tax Year 2003, IRS has

allowed tax-exempt organizations to file Forms 990 electronically in Extensible Markup

Language (XML). Beginning in

2005, the IRS established a mandatory schedule for electronic

filing of Forms 990 and 990-PF

by charities and private foundations. For tax years ending on

or after December 31, 2006, all

public charities with $10 million

or more in assets that file at least

250 returns annually, and all private foundations and nonexempt

charitable trusts, regardless of

asset size, that file 250 or more

returns annually are required

to file electronically.28 SOI has

incorporated these returns into

its data collection systems by

creating digital images based on

the electronic data, and integrating those images into its existing

split-screen edit system. Beginning with Tax Year 2006, SOI

will extract data items directly

from electronically filed XML

data, significantly reducing the

amount of data transcription

required.

28 Excise and employment tax returns, as well as wage and income statements required for each employee, are included in the 250-return threshold.

122

A History of the Tax-Exempt Sector: An SOI Perspective

Statistics of Income Bulletin | Winter 2008

Appendix A

Types of Organizations Exempt under Internal Revenue Code Section 501(c)

IRC section

Description of organization

General nature of activities

501(c)(1)

Corporations organized under an Act of Congress

U.S. instrumentality

501(c)(2)

Title-holding corporations for exempt organizations

Holding title to property for exempt organizations

501(c)(3)

Religious, educational, charitable, scientific, or literary organizations;

organizations that test for public safety. Also, organizations that prevent

cruelty to children or animals, or foster national or international amateur

sports competition

Activities of a nature implied by the description of the class of

organization

501(c)(4)

Civic leagues, social welfare organizations, and local associations of

employees

Promotion of community welfare and activities from which net earnings

are devoted to charitable, educational, or recreational purposes

501(c)(5)

Labor, agricultural, and horticultural organizations

Educational or instructive groups whose purpose is to improve conditions

of work, products, and efficiency

501(c)(6)

Business leagues, chambers of commerce, real estate boards,

and like organizations

Improving conditions in one or more lines of business

501(c)(7)

Social and recreational clubs

Pleasure, recreation, and social activities

501(c)(8)

Fraternal beneficiary societies and associations

Lodges providing for payment of life, health, accident, or other insurance

benefits to members

501(c)(9)

Voluntary employees’ beneficiary associations (including Federal

employees’ voluntary beneficiary associations formerly covered

by section 501(c)(10))

Providing for payment of life, health, accident, or other insurance benefits

to members

501(c)(10)

Domestic fraternal beneficiary societies and associations

Lodges, societies, or associations devoting their net earnings to

charitable, fraternal, and other specified purposes, without life, health, or

accident insurance benefits to members

501(c)(11)

Teachers’ retirement fund associations

Fiduciary associations providing for payment of retirement benefits

501(c)(13)

Benevolent life insurance associations, mutual ditch or irrigation

companies, mutual or cooperative telephone companies, and like

organizations

Cemetery companies

501(c)(14)

State-chartered credit unions and mutual insurance or reserve funds

Providing loans to members or providing insurance of, or reserve funds

for, shares or deposits in certain banks or loan associations

501(c)(15)

Mutual insurance companies or associations other than life, if written

premiums for the year do not exceed $350,000

Providing insurance to members, substantially at cost

501(c)(16)

Corporations organized to finance crop operations

501(c)(17)

Supplemental unemployment benefit trusts

501(c)(18)

Employee-funded pension trusts (created before June 25, 1959)

501(c)(19)

Posts or organizations of past or present members of the armed forces

501(c)(21)

Black Lung Benefit Trusts

501(c)(22)

Withdrawal liability payment funds

501(c)(12)

501(c)(23)

501(c)(24)

Associations of past and present members of the armed forces

founded before 1880

Trusts described in section 4049 of the Employee Retirement Income

Security Act of 1974

501(c)(25)

Title-holding corporations or trusts with no more than 35 shareholders

or beneficiaries and only one class of stock or beneficial interest

501(c)(26)

State-sponsored high-risk health insurance plans

501(c)(27)

State-sponsored workers’ compensation reinsurance plans

Activities of a mutually beneficial nature implied by the description of the

class of organization

Arranging for burials and incidental related activities

Financing crop operations in conjunction with activities of a marketing or

purchasing association

Fiduciary agent for payment of supplemental unemployment

compensation benefits

Providing for payments of benefits under a pension plan funded by

employees

Providing services to veterans or their dependents; advocacy of

veteran’s issues; and promotion of patriotism and community service

programs

Providing funds to satisfy coal mine operators’ liability for disability or

death due to black lung disease

Providing funds to meet the liability of employers withdrawing from a

multiple-employer pension fund

Providing insurance and other benefits to veterans or their dependents

Providing funds for employee retirement income

Acquiring real property and remitting all income earned from such

property to one or more exempt organizations; pension, profit-sharing, or

stock bonus plans; or governmental units

Providing coverage for medical care on a not-for-profit basis to residents

with pre-existing medical conditions that resulted in denied or exorbitantly

priced traditional medical care coverage

Pooled employers’ funds providing reimbursements to employees for

losses arising under workers’ compensation acts; also, State-created,

-operated, and -controlled organizations providing workers’ compensation

insurance to employers

NOTE: Prepaid legal service funds, previously described in section 501(c)(20) of the Internal Revenue Code, were no longer tax exempt effective for tax years beginning after

June 30, 1992.

123

A History of the Tax-Exempt Sector: An SOI Perspective

Statistics of Income Bulletin | Winter 2008

Appendix B

Legislation of Note, 1894-Present



The Wilson-Gorman Tariff Act of 1894 established

a flat, 2-percent tax on corporate income, but excluded

“. . . corporations, companies, or associations organized and conducted solely for charitable, religious, or

educational purposes, including fraternal beneficiary

associations.” The law was declared unconstitutional

by the Supreme Court in 1896.



The Revenue Act of 1909 established an excise tax

on corporate income and included tax exemption

in language similar to that introduced in the 1894

act. The 1909 act included the important concept of

private inurement, meaning that a charitable organization’s income could not be used to benefit an individual related to the organization.



The Revenue Act of 1913 established the modern

income tax system and included tax exemption and

private inurement in language similar to that in the

1909 act.



The Revenue Act of 1917 included the introduction

of the charitable income tax deduction for individual

donors.



The Revenue Act of 1918 added organizations operated “for the prevention of cruelty to children or

animals” to the list of tax-exempt public charities and

added the estate tax charitable deduction for charitable bequests.



The Revenue Act of 1950 introduced the unrelated

business income taxation of tax-exempt organizations.



The Revenue Code of 1954 introduced a number of

changes to the tax-exempt organization tax law. Most

notably, the current structure of the Internal Revenue

Code was developed, with section 501(c) describing

tax-exempt organizations. Charitable organizations

were described under section 501(c)(3) and now

included organizations operated for the purpose of

“testing for public safety.” Following passage of the

Revenue Code of 1954, charities were not allowed to

“participate in, or intervene in (including the publishing or distributing of statements), a political campaign

on behalf of any candidate for public office.”



The Revenue Act of 1964 increased the charitable

income tax deduction for contributions made to publicly supported organizations to 30 percent of adjusted

gross income (AGI). Previously, the charitable income tax deduction had been limited to 20 percent of

AGI for publicly supported organizations. Prior to

the 1964 act, only specific organizations, including

churches and many schools, were subject to the 30percent limitation.



The Tax Reform Act of 1969 (TRA69) included significant legislation regarding charitable

organizations.



124



The Revenue Act of 1921 added both “literary”

groups and “any community chest, fund, or foundation” to the list of tax-exempt organizations.



The Revenue Act of 1934 set forth limits on lobbying

by charitable organizations, stating that “no substantial part” of the organizations’ activities can involve

“propaganda” or attempts “to influence legislation.”



The Revenue Act of 1936 expanded the charitable

income tax deduction to corporate donors.



The Revenue Act of 1943 required certain tax-exempt organizations to file the Form 990 information

return with the IRS. A number of organizations,

including religious organizations, most schools, and

publicly supported charitable organizations, were exempt from this filing requirement.

TRA69 introduced the first definition of private

foundations, for tax purposes, expanded filing

requirements for these newly defined organizations, and established the “private foundation

rules.” Foundations were required to pay an

annual excise tax equaling 4 percent of their

net investment income. With certain exceptions, taxes were imposed on a nonoperating

foundation that failed to distribute, for charitable

purposes, the greater of its adjusted net income,

excluding long-term capital gains, or its minimum investment return, defined as 6 percent of

investment assets, annually. The legislation also

prohibited self-dealing, defined as conducting

activities that benefit foundation managers, officers, substantial contributors, and other foundation “insiders,” and imposed taxes on individuals

who engaged in self-dealing activities. Further,

in cases of “willful repeated acts or a willful and

A History of the Tax-Exempt Sector: An SOI Perspective

Statistics of Income Bulletin | Winter 2008

Appendix B

Legislation of Note, 1894-Present—Continued

flagrant act” of self-dealing, a foundation could

be subject to termination. TRA69 also imposed

sanctions on foundations that engaged in a variety of other activities, such as holding excess

interests in a business enterprise or investments

that jeopardized the foundation’s charitable purpose, making taxable expenditures, or violating

other requirements.





organization (called the “fragmentation” rule).

Second, in order to be considered “related,”

there had to be a causal relationship between an

organization’s engaging in a trade or business

activity and the performance of the organization’s exempt functions. This relationship had to

be substantial, and the activities that generated

the income must have contributed importantly

to the accomplishment of the organization’s exempt purpose(s).

TRA69 expanded the tax on unrelated business

income, extending the tax to all tax-exempt organizations described in IRC sections 501(c) and

401(a) (except United States instrumentalities),

and including churches for the first time.

The legislation expanded the filing requirements

for many tax-exempt organizations. Under the

new requirements, all tax-exempt organizations

were required to complete annual returns; however, TRA69 exempted certain organizations

and activities from this requirement. Churches

and their integrated auxiliary organizations

were not subject to the new filing requirements.

Organizations that normally had gross receipts

of $5,000 or less and that previously were not

required to file Form 990 were also exempted.

Additionally, the “exclusively religious activities of any religious order” were not subject to

the reporting requirements, although certain

religious organizations were required to report

activities that were not religious in nature. Finally, TRA69 permitted additional exclusions to

the reporting requirement, to be determined at

the discretion of the Treasury Department.



TRA69 also increased the individual charitable

income tax deduction limitation from 30 percent

to 50 percent of AGI for contributions made to

most charitable organizations. Contributions to

nonoperating private foundations generally remained subject to the 20-percent limitation.



Additionally, TRA69 introduced two important

concepts regarding unrelated business taxation

of tax-exempt organizations. First, a trade or

business activity does not lose its identity as a

trade or business merely because it was carried

on within a larger aggregate of similar activities

or within a larger complex of other endeavors

that are related to the exempt purposes of the



Under TRA69, certain payments of interest,

annuities, royalties, and rents from taxable subsidiaries to a tax-exempt parent were subject to

UBIT. These types of payments from tax-exempt subsidiaries were taxed to the extent that

the subsidiaries’ payments were generated from

unrelated business income.



The Tax Reform Act of 1976 redefined the minimum

investment return calculation for private foundations

to 5 percent of investment assets.



The Revenue Act of 1978 reduced the net investment

income tax rate for private foundations to 2 percent.



The Economic Recovery Tax Act of 1981 changed

the basis for the minimum charitable distribution required of nonoperating foundations from the greater

of adjusted net income or minimum investment return

to minimum investment return only.



The Deficit Reduction Act of 1984 (DEFRA) raised

the limit on individual deductions for contributions

to nonoperating private foundations from 20 percent

to 30 percent of AGI; gifts of capital gain property

to nonoperating private foundations remained subject to the 20-percent limitation. DEFRA included a

provision to permit nonoperating foundations’ donors

to carry over contributions that exceeded the 20- or

30-percent limitation for up to 5 years. For a 10-year

period ending December 31, 1994, contributors were

permitted to deduct the full fair market, rather than

a reduced value, for donations of certain appreciated

stock to private nonoperating foundations. Additionally, operating foundations that met certain additional

criteria were exempted from the excise tax on net investment income. To encourage foundations to make

charitable distributions at levels above the minimum

required amount, DEFRA included a provision that

125

A History of the Tax-Exempt Sector: An SOI Perspective

Statistics of Income Bulletin | Winter 2008

Appendix B

Legislation of Note, 1894-Present—Continued

allowed foundations that showed improvement in the

amount of charitable distributions made over a 5-year

period to be eligible for a 1-percent reduction in the

excise tax. Additionally, DEFRA set an upper limit

on the amount of administrative expenditures incurred

for grantmaking activities that private foundations

could count toward the minimum charitable distribution. This limitation was effective for a 5-year period

to allow the Treasury Department to study its effects

on foundations’ charitable distributions. Subsequent

research showed that the limitation had little effect on

charitable distributions, and the regulation expired at

the end of Tax Year 1990.







126

The Revenue Reconciliation Act of 1993 imposed

a tax on certain nondeductible lobbying and political expenditures made by membership organizations

tax-exempt under IRC sections 501(c)(4), (5), and

(6). These organizations were liable for the tax if they

did not notify members of the shares of their dues allocated to the nondeductible lobbying expenditures or

if they failed to include in the notice the entire amount

of dues allocated to the expenditures.

The Taxpayer Bill of Rights 2, enacted for 1996,

added “intermediate sanctions” as an alternative to

the revocation of an organization’s tax-exempt status

in instances when a person with substantial influence

over the affairs of the organization was found to have

engaged in an excess benefit transaction. The rules,

which apply to organizations exempt under IRC sections 501(c)(3) and 501(c)(4), require reimbursement

of the excess benefit to the organization and payment

of excise taxes and interest penalties by disqualified

persons and/or organization managers.

The Taxpayer Relief Act of 1997 (TRA97) terminated exceptions granted to specific organizations under

a Tax Reform Act of 1986 provision that revoked the

tax-exempt status of any organization if a substantial

part of its activities consisted of providing commercial-type insurance. Under TRA97, tax exemption

for the two largest public charities at the time was

revoked: the Teachers Insurance Annuity Association

and the College Retirement Equities Fund (collectively known as TIAA-CREF). Additionally, TRA97

amended UBIT rules, effective after December 31,

1997, to exempt from unrelated business taxation

certain “qualified” sponsorship payments solicited or

received by tax-exempt organizations, and to allow

charitable organizations and pension, profit-sharing,

and stock-bonus plans exempt from tax under section

501(a) to hold shares in an S corporation without the

S corporation losing its status as such.



The Tax and Trade Relief Extension Act of 1998

made permanent the provision that permitted contributors to deduct the full fair market, rather than a

reduced value, for donations of certain appreciated

stock to nonoperating private foundations.



The Pension Protection Act of 2006 introduced a

number of regulatory changes. IRC section 501(c)(3)

public charities and private foundations reporting

unrelated business income were required to make

their Forms 990-T, Exempt Organization Business

Income Tax Returns, available for public inspection.

Organizations with gross receipts less than $25,000

(the Form 990/990-EZ filing threshold) were required

to file the Form 990-N, an annual electronic notice

also known as the “e-Postcard.” Additional filing requirements were placed on supporting organizations,

donor-advised funds, and credit counseling organizations. The legislation also doubled excise tax rates

on the prohibited activities of private foundations and

public charities.



Tax Technical Corrections Act of 2007 required the

Internal Revenue Service to make available for public inspection all Forms 990-T filed by IRC section

501(c)(3) public charities and private foundations after

August 17, 2006, the date the Pension Protection Act

of 2006 was enacted. The Pension Act required section 501(c)(3) organizations to publicly disclose their

Forms 990-T, but it failed to include language authorizing IRS to do so.

A History of the Tax-Exempt Sector: An SOI Perspective

Statistics of Income Bulletin | Winter 2008

Table 1. Public Charities: Selected Financial Data, in Current Dollars, Tax Years 1985-2004

[All figures are estimates based on samples—money amounts are in millions of current dollars]

Total revenue

Program

service

revenue

Contributions,

gifts, and

grants

received

Investment

income [1]

Other

Total

expenses

Net income

268,390

167,893

55,771

13,933

30,792

244,214

24,175

210,879

292,483

187,934

60,115

13,855

30,579

263,468

29,015

529,514

231,765

310,766

211,904

61,686

15,194

21,982

288,681

22,085

583,573

257,645

354,647

239,293

69,062

19,258

27,034

330,815

23,832

133,157

655,426

293,819

398,628

272,134

76,973

21,954

27,567

371,508

27,120

1990

141,757

697,315

321,984

435,567

306,899

85,332

22,697

20,639

409,447

26,120

1991

149,544

777,471

365,706

491,106

344,446

87,462

23,404

35,794

458,739

32,367

1992

157,941

849,324

398,177

523,793

374,804

94,992

23,106

30,891

490,245

33,548

1993

165,599

926,847

438,451

566,067

402,760

103,053

23,227

37,027

530,210

35,857

1994

174,918

993,381

464,034

589,102

422,413

110,724

25,741

30,225

548,166

40,936

1995

180,931

1,143,079

512,383

663,371

443,052

127,743

31,060

61,516

604,645

58,725

1996

192,059

1,293,439

564,566

704,346

467,559

137,666

34,057

65,064

637,917

66,429

1997

198,957

1,438,977

624,978

754,616

486,407

146,171

37,040

84,998

677,143

77,473

1998

207,272

1,351,541

459,188

752,044

502,832

161,751

28,562

58,898

684,566

67,478

1999

211,615

1,453,675

481,444

800,676

518,111

174,992

30,466

77,107

714,487

86,189

2000

230,159

1,562,536

539,367

866,208

579,081

199,076

29,136

58,916

796,434

69,775

2001

240,569

1,631,719

611,390

896,974

630,817

212,427

23,678

30,052

862,721

34,253

2002

251,676

1,733,852

693,576

955,267

691,791

214,484

20,518

28,474

934,672

20,595

2003

263,353

1,899,857

735,600

1,072,171

754,585

229,987

23,594

64,005

1,009,675

62,496

2004

276,191

2,058,610

782,510

1,152,989

801,199

248,570

27,830

75,391

1,058,489

94,500

Number of

returns

Total

assets

Total

liabilities

Total

1985

106,449

423,544

186,390

1986

113,072

489,180

1987

122,018

1988

124,233

1989

Tax year

[1] Includes “interest on savings and temporary cash investments,” “dividends and interest from securities,” and “other investment income (loss)” from Form 990 and “investment income

(loss)” from Form 990-EZ which was introduced for Tax Year 1989.

NOTES: Data are from Forms 990 (and, beginning with Tax Year 1989, Form 990-EZ) for nonprofit charitable organizations that are tax-exempt under Internal Revenue Code section

501(c)(3) and exclude private foundations, most organizations with receipts less than $25,000 in current dollars, as well as most churches, and certain other types of religious organizations.

Detail may not add to totals because of rounding.

127

A History of the Tax-Exempt Sector: An SOI Perspective

Statistics of Income Bulletin | Winter 2008

Table 2. Public Charities: Selected Financial Data, in Constant Dollars, Tax Years 1985-2004

[All figures are estimates based on samples—money amounts are in millions of constant 2004 dollars]

Total revenue

Number of

returns

Total

assets

Total

liabilities

Total

Program

service

revenue

Contributions,

gifts, and

grants

received

1985

106,449

664,965

292,632

421,372

263,592

87,560

21,875

48,344

383,416

37,956

1986

113,072

751,380

323,910

449,254

288,667

92,337

21,281

46,970

404,687

44,567

1987

122,018

791,623

346,489

464,595

316,796

92,221

22,715

32,863

431,578

33,017

1988

124,233

843,847

372,555

512,820

346,018

99,864

27,847

39,091

478,358

34,461

1989

133,157

913,008

409,290

555,289

379,083

107,223

30,582

38,401

517,511

37,778

1990

141,757

935,100

431,781

584,095

411,551

114,430

30,437

27,676

549,068

35,027

1991

149,544

1,007,602

473,955

636,473

446,402

113,351

30,331

46,389

594,526

41,948

1992

157,941

1,076,094

504,490

663,646

474,877

120,355

29,275

39,139

621,140

42,505

1993

165,599

1,147,437

542,802

700,791

498,617

127,580

28,755

45,840

656,400

44,391

1994

174,918

1,204,971

562,873

714,581

512,386

134,308

31,223

36,663

664,925

49,656

1995

180,931

1,357,977

608,711

788,084

526,346

151,758

36,899

73,081

718,319

69,765

1996

192,059

1,508,150

658,284

821,267

545,174

160,518

39,710

75,865

743,811

77,456

1997

198,957

1,650,506

716,850

865,544

557,909

167,658

42,485

97,493

776,683

88,861

1998

207,272

1,533,999

521,179

853,569

570,714

183,588

32,418

66,849

776,982

76,587

1999

211,615

1,625,209

538,254

895,155

579,248

195,641

34,061

86,205

798,796

96,359

2000

230,159

1,710,977

590,607

948,498

634,093

217,988

31,904

64,513

872,095

76,403

2001

240,569

1,744,308

653,576

958,865

674,343

227,084

25,312

32,126

922,249

36,616

2002

251,676

1,822,278

728,948

1,003,986

727,072

225,423

21,564

29,926

982,340

21,645

2003

263,353

1,954,953

756,933

1,103,264

776,468

236,656

24,278

65,861

1,038,955

64,308

2004

276,191

2,058,610

782,510

1,152,989

801,199

248,570

27,830

75,391

1,058,489

94,500

Tax year

Investment

income [1]

Other

Total

expenses

Net income

[1] Includes “interest on savings and temporary cash investments,” “dividends and interest from securities,” and “other investment income (loss)” from Form 990 and “investment income

(loss)” from Form 990-EZ which was introduced for Tax Year 1989.

NOTES: Data are from Forms 990 (and, beginning with Tax Year 1989, Form 990-EZ) for nonprofit charitable organizations that are tax-exempt under Internal Revenue Code section

501(c)(3) and exclude private foundations, most organizations with receipts less than $25,000 in current dollars, as well as most churches, and certain other types of religious organizations.

Data were adjusted based on the chain-type price index for Gross Domestic Product as reported by the U.S. Department of Commerce, Bureau of Economic Analysis. Tax Year 2004 is

used as the base year for these adjustments. Detail may not add to totals because of rounding.

128

A History of the Tax-Exempt Sector: An SOI Perspective

Statistics of Income Bulletin | Winter 2008

Table 3. Domestic Private Foundations, Selected Financial Data, in Current Dollars, Tax Years

1985-2004

[All figures are estimates based on samples—money amounts are in millions of current dollars]

Type of foundation

and tax year

All private foundations

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

Nonoperating private foundations

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

Operating private foundations

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

Footnotes at end of table.

Total assets (fair market value)

Number

of

returns

Total assets

(book value)

(1)

Securities

Total

revenue

Net

investment

income

Total

expenses

(4)

(5)

(6)

(7)

(8)

94,996

110,978

111,837

126,437

142,545

150,997

173,121

181,426

192,277

203,644

242,917

288,588

342,689

397,084

466,863

471,646

455,423

413,007

474,952

509,924

87,756

102,339

103,492

118,009

133,646

142,598

162,737

171,439

180,813

191,278

227,077

268,327

323,004

380,531

444,151

447,437

416,715

377,439

448,773

481,177

73,294

85,145

85,355

97,544

112,892

114,969

136,222

141,336

147,594

158,934

190,739

225,087

272,412

317,900

363,442

361,418

329,353

294,385

344,314

361,158

16,193

19,801

16,834

16,112

19,388

19,006

20,194

22,508

24,460

26,503

30,814

48,247

55,460

59,735

83,286

72,780

45,264

27,775

48,391

58,668

9,995

12,252

11,234

10,378

12,022

11,931

13,209

14,078

15,093

14,978

20,355

26,189

34,801

39,313

57,142

48,830

25,719

17,648

25,193

34,019

7,141

8,148

8,928

9,549

10,467

11,285

12,676

13,569

14,579

15,708

17,189

19,852

22,414

25,902

33,876

37,434

36,661

34,392

35,099

36,552

62,561

75,289

81,841

91,497

101,614

110,443

121,277

129,286

139,953

151,151

174,866

210,439

256,409

297,759

349,131

374,990

379,018

352,163

384,941

410,658

84,433

98,926

100,792

113,991

129,241

136,428

156,808

163,768

173,996

182,544

218,343

262,739

314,368

365,036

426,316

432,707

416,810

377,672

436,296

469,389

80,582

94,387

95,963

108,619

123,590

131,138

151,046

157,408

166,588

174,897

210,407

250,170

300,693

355,295

412,420

417,850

392,037

355,263

419,322

451,114

67,401

78,937

79,779

90,839

105,674

107,190

127,354

131,873

138,090

146,979

177,615

210,520

256,081

299,711

340,942

341,662

311,416

279,699

327,980

344,740

14,542

17,819

15,301

14,580

17,809

16,738

18,323

20,310

22,173

22,935

27,543

44,430

51,030

54,711

74,327

66,185

41,214

24,500

44,285

54,072

9,131

11,282

10,443

9,676

11,226

11,126

12,278

13,073

14,068

13,079

18,862

24,421

32,390

36,778

52,367

45,654

24,483

16,666

24,023

32,289

6,275

7,237

8,132

8,702

9,636

10,236

11,548

12,270

13,247

13,945

15,358

17,980

19,990

23,375

31,029

33,565

32,603

30,608

31,929

33,207

8,833

9,807

9,570

10,510

10,877

11,969

13,442

14,793

15,674

18,136

20,705

22,126

24,511

27,912

35,434

34,534

34,559

31,354

33,569

34,876

10,563

12,052

11,045

12,447

13,304

14,569

16,313

17,658

18,281

21,100

24,574

25,849

28,321

32,048

40,547

38,939

38,613

35,335

38,655

40,534

7,174

7,952

7,529

9,390

10,057

11,460

11,691

14,031

14,224

16,381

16,669

18,157

22,311

25,236

31,731

29,587

24,678

22,177

29,451

30,063

5,893

6,208

5,576

6,706

7,218

7,779

8,868

9,463

9,504

11,955

13,124

14,566

16,331

18,189

22,500

19,756

17,937

14,686

16,334

16,418

1,651

1,982

1,534

1,532

1,579

2,268

1,871

2,198

2,287

3,568

3,272

3,817

4,430

5,024

8,959

6,595

4,050

3,275

4,106

4,596

864

971

791

702

796

805

932

1,006

1,026

1,899

1,494

1,768

2,411

2,535

4,775

3,177

1,236

982

1,170

1,731

866

911

796

847

831

1,049

1,128

1,299

1,332

1,763

1,831

1,872

2,424

2,526

2,848

3,868

4,058

3,785

3,171

3,345

Total

Investment

assets

(2)

(3)

31,171

35,081

35,847

37,057

38,719

40,105

41,276

42,383

43,956

45,801

47,917

50,774

55,113

56,658

62,694

66,738

70,787

73,255

76,348

76,897

71,394

85,096

91,411

102,007

112,490

122,412

134,718

144,079

155,626

169,287

195,570

232,565

280,920

325,672

384,565

409,524

413,577

383,516

418,510

445,534

28,599

32,315

32,688

33,829

35,652

36,880

37,801

38,576

40,166

41,983

43,966

46,066

50,541

52,460

58,840

61,501

63,650

67,101

70,004

70,613

2,571

2,766

3,159

3,227

3,066

3,226

3,474

3,807

3,790

3,818

3,951

4,708

4,572

4,198

3,854

5,238

7,137

6,154

6,344

6,284

129

A History of the Tax-Exempt Sector: An SOI Perspective

Statistics of Income Bulletin | Winter 2008

Table 3. Domestic Private Foundations, Selected Financial Data, in Current Dollars, Tax Years

1985-2004—Continued

[All figures are estimates based on samples—money amounts are in millions of current dollars]

Type of foundation

and tax year

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

130

All private foundations

Nonoperating private foundations

Operating private foundations

Charitable expenses

Excess of

revenue over

expenses

Total

Contributions,

gifts, and

grants paid

Operating and

administrative

expenses

Net investment

income excise

tax

Noncharitableuse assets [1]

Qualifying

distributions

(9)

(10)

(11)

(12)

(13)

(14)

(15)

9,053

11,653

7,906

6,563

8,921

7,721

7,518

8,939

9,881

10,795

13,626

28,395

33,046

33,833

49,410

35,346

8,602

-6,618

13,292

22,116

6,188

7,004

7,685

8,372

9,160

10,069

11,272

11,794

12,952

13,788

14,412

16,881

19,076

22,288

26,402

31,874

31,698

30,423

31,058

32,125

5,171

6,116

6,676

7,218

7,911

8,560

9,762

10,080

11,072

11,755

12,256

14,519

16,421

19,394

22,763

27,564

27,383

26,303

26,667

27,625

1,017

888

1,009

1,154

1,249

1,509

1,511

1,714

1,880

2,033

2,156

2,362

2,655

2,894

3,639

4,311

4,315

4,120

4,392

4,500

168

195

173

141

165

155

170

187

203

188

279

369

502

523

730

625

305

234

328

469

80,425

100,938

108,092

112,420

127,695

136,404

152,075

163,984

176,123

181,942

210,033

245,287

297,356

346,059

407,220

448,812

424,028

388,845

408,973

451,199

6,552

7,654

8,117

8,837

9,676

10,520

11,930

12,437

13,705

14,538

15,305

17,850

19,985

23,389

27,604

33,454

33,067

31,712

32,780

33,486

8,267

10,582

7,169

5,878

8,173

6,503

6,775

8,040

8,926

8,990

12,185

26,450

31,040

31,335

43,299

32,619

8,611

-6,107

12,356

20,865

5,484

6,447

7,062

7,683

8,479

9,185

10,376

10,764

11,854

12,422

13,034

15,456

17,231

20,569

24,367

29,056

28,882

27,911

28,826

29,803

5,105

6,028

6,593

7,132

7,836

8,483

9,558

9,870

10,919

11,417

11,902

14,183

15,855

18,966

22,335

26,552

26,526

25,487

26,116

27,074

379

419

469

551

642

703

818

893

935

1,005

1,132

1,273

1,376

1,603

2,033

2,505

2,356

2,423

2,710

2,729

163

191

169

137

161

151

165

182

199

183

269

357

487

501

686

601

297

225

316

456

73,802

93,386

100,509

104,548

119,237

127,726

141,936

153,196

164,841

169,190

194,955

229,452

279,163

326,067

382,028

421,273

397,969

368,839

386,964

427,732

5,651

6,676

7,248

7,935

8,688

9,406

10,745

11,146

12,167

12,712

13,379

15,832

17,727

21,189

25,057

29,845

29,785

28,727

29,811

30,493

785

1,071

738

686

748

1,219

743

899

955

1,805

1,440

1,945

2,006

2,498

6,111

2,727

-8

-510

936

1,251

704

557

623

689

681

883

896

1,031

1,098

1,367

1,378

1,426

1,845

1,719

2,035

2,818

2,815

2,513

2,232

2,323

67

89

83

86

74

77

204

210

153

339

354

336

566

428

428

1,012

857

816

551

551

637

469

540

603

607

806

692

821

944

1,028

1,024

1,089

1,279

1,290

1,606

1,806

1,959

1,697

1,681

1,771

5

4

4

3

4

4

4

5

5

5

10

12

15

22

43

24

8

9

11

12

6,624

7,552

7,584

7,873

8,458

8,679

10,139

10,788

11,282

12,752

15,078

15,835

18,193

19,993

25,192

27,539

26,059

20,006

22,009

23,467

901

979

868

902

988

1,114

1,185

1,291

1,537

1,825

1,926

2,018

2,258

2,199

2,547

3,608

3,282

2,984

2,969

2,993

[1] Noncharitable-use assets, also known as net investment assets, are calculated based on the value of assets not used for charitable purposes.

NOTE: Detail may not add to totals because of rounding.

A History of the Tax-Exempt Sector: An SOI Perspective

Statistics of Income Bulletin | Winter 2008

Table 4. Domestic Private Foundations, Selected Financial Data, in Constant Dollars, Tax Years

1985-2004

[All figures are estimates based on samples—money amounts are in millions of constant 2004 dollars]

Type of foundation

and tax year

All private foundations

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

Nonoperating private foundations

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

Operating private foundations

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

Number

of

returns

Total assets

(book value)

(1)

Total assets (fair market value)

Total revenue

Net

investment

income

Total expenses

(5)

(6)

(7)

(8)

137,777

157,192

154,721

170,641

186,169

191,224

210,907

217,213

223,846

232,020

269,767

312,870

370,486

431,902

496,561

489,944

445,469

396,689

461,787

481,177

115,072

130,783

127,605

141,049

157,259

154,174

176,544

179,072

182,721

192,787

226,597

262,451

312,457

360,817

406,328

395,752

352,078

309,398

354,299

361,158

25,423

30,414

25,168

23,298

27,008

25,487

26,171

28,517

30,281

32,149

36,608

56,256

63,613

67,799

93,114

79,694

48,387

29,191

49,794

58,668

15,692

18,819

16,794

15,007

16,747

16,000

17,119

17,837

18,685

18,169

24,182

30,536

39,917

44,621

63,885

53,469

27,494

18,548

25,924

34,019

11,211

12,515

13,347

13,807

14,581

15,133

16,428

17,192

18,049

19,054

20,420

23,147

25,708

29,399

37,874

40,990

39,191

36,146

36,117

36,552

132,559

151,950

150,685

164,830

180,032

182,950

203,223

207,494

215,408

221,425

259,391

306,353

360,580

414,316

476,622

473,814

445,569

396,933

448,949

469,389

126,513

144,978

143,465

157,063

172,161

175,857

195,756

199,436

206,236

212,151

249,964

291,698

344,895

403,260

461,086

457,546

419,088

373,381

431,483

451,114

105,820

121,248

119,270

131,353

147,205

143,741

165,051

167,083

170,955

178,285

211,007

245,467

293,725

340,172

381,173

374,120

332,903

293,964

337,492

344,740

22,831

27,370

22,875

21,082

24,808

22,446

23,746

25,733

27,450

27,821

32,721

51,806

58,531

62,096

83,098

72,472

44,058

25,750

45,569

54,072

14,336

17,328

15,612

13,991

15,638

14,920

15,912

16,563

17,416

15,865

22,408

28,475

37,151

41,743

58,546

49,991

26,172

17,516

24,719

32,289

9,852

11,115

12,157

12,583

13,423

13,726

14,966

15,546

16,400

16,915

18,245

20,965

22,928

26,531

34,690

36,754

34,853

32,169

32,855

33,207

16,584

18,512

16,512

17,998

18,532

19,537

21,142

22,372

22,632

25,595

29,194

30,140

32,484

36,375

45,331

42,638

41,278

37,137

39,776

40,534

11,264

12,214

11,256

13,578

14,009

15,368

15,151

17,777

17,610

19,870

19,803

21,172

25,591

28,643

35,475

32,398

26,381

23,308

30,305

30,063

9,252

9,536

8,335

9,696

10,054

10,432

11,493

11,989

11,766

14,502

15,591

16,984

18,732

20,645

25,155

21,633

19,175

15,435

16,807

16,418

2,592

3,044

2,293

2,216

2,199

3,041

2,425

2,785

2,831

4,328

3,887

4,450

5,081

5,703

10,016

7,222

4,329

3,442

4,225

4,596

1,356

1,491

1,182

1,016

1,109

1,079

1,207

1,274

1,270

2,303

1,775

2,061

2,766

2,877

5,338

3,479

1,322

1,032

1,204

1,731

1,359

1,399

1,190

1,224

1,157

1,407

1,462

1,646

1,649

2,138

2,175

2,182

2,780

2,868

3,184

4,236

4,338

3,978

3,263

3,345

Total

Investment

assets

Securities

(2)

(3)

(4)

31,171

35,081

35,847

37,057

38,719

40,105

41,276

42,383

43,956

45,801

47,917

50,774

55,113

56,658

62,694

66,738

70,787

73,255

76,348

76,897

112,089

130,707

136,659

147,503

156,699

164,155

174,595

182,548

192,666

205,346

232,337

271,171

322,216

369,637

429,943

448,429

442,113

403,076

430,647

445,534

149,143

170,462

167,196

182,828

198,565

202,487

224,365

229,866

238,039

247,020

288,585

336,494

393,064

450,691

521,953

516,452

486,847

434,070

488,725

509,924

28,599

32,315

32,688

33,829

35,652

36,880

37,801

38,576

40,166

41,983

43,966

46,066

50,541

52,460

58,840

61,501

63,650

67,101

70,004

70,613

98,221

115,643

122,352

132,305

141,548

148,104

157,175

163,806

173,261

183,347

207,740

245,372

294,101

337,957

390,328

410,614

405,170

370,123

396,104

410,658

2,571

2,766

3,159

3,227

3,066

3,226

3,474

3,807

3,790

3,818

3,951

4,708

4,572

4,198

3,854

5,238

7,137

6,154

6,344

6,284

13,868

15,064

14,307

15,198

15,151

16,050

17,420

18,743

19,404

21,999

24,597

25,799

28,114

31,681

39,615

37,815

36,944

32,953

34,543

34,876

Footnotes at end of table.

131

A History of the Tax-Exempt Sector: An SOI Perspective

Statistics of Income Bulletin | Winter 2008

Table 4. Domestic Private Foundations, Selected Financial Data, in Constant Dollars, Tax Years

1985-2004—Continued

[All figures are estimates based on samples—money amounts are in millions of constant 2004 dollars]

Type of foundation

and tax year

All private foundations

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

Nonoperating private foundations

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

Operating private foundations

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

Excess of

revenue

over

expenses

Charitable expenses

Total

Contributions,

gifts, and grants

paid

Operating and

administrative

expenses

Net investment

income excise tax

Noncharitableuse assets [1]

Qualifying

distributions

(9)

(10)

(11)

(12)

(13)

(14)

(15)

14,213

17,900

11,820

9,491

12,427

10,354

9,743

11,326

12,232

13,095

16,187

33,109

37,904

38,401

55,240

38,704

9,196

-6,955

13,677

22,116

9,715

10,758

11,489

12,106

12,760

13,502

14,609

14,943

16,034

16,725

17,121

19,683

21,881

25,297

29,518

34,902

33,885

31,975

31,959

32,125

8,119

9,394

9,980

10,438

11,020

11,479

12,651

12,772

13,707

14,259

14,560

16,929

18,835

22,012

25,449

30,182

29,273

27,645

27,440

27,625

1,596

1,364

1,509

1,668

1,740

2,023

1,958

2,172

2,327

2,466

2,561

2,754

3,046

3,284

4,069

4,720

4,612

4,330

4,519

4,500

263

299

259

204

230

208

220

237

251

228

332

431

576

594

816

684

326

246

337

469

126,268

155,040

161,598

162,560

177,879

182,918

197,090

207,768

218,041

220,696

249,519

286,005

341,067

392,777

455,272

491,449

453,286

408,676

420,833

451,199

10,287

11,757

12,134

12,778

13,478

14,107

15,461

15,757

16,966

17,634

18,182

20,813

22,922

26,546

30,861

36,632

35,349

33,329

33,731

33,486

12,979

16,255

10,717

8,499

11,385

8,720

8,780

10,187

11,050

10,905

14,476

30,841

35,603

35,565

48,408

35,718

9,205

-6,419

12,714

20,865

8,610

9,902

10,558

11,109

11,811

12,317

13,447

13,637

14,675

15,067

15,484

18,021

19,764

23,346

27,243

31,817

30,875

29,334

29,662

29,803

8,014

9,258

9,856

10,313

10,916

11,375

12,387

12,506

13,517

13,849

14,140

16,537

18,186

21,526

24,970

29,074

28,357

26,787

26,873

27,074

595

644

701

796

895

942

1,061

1,132

1,158

1,219

1,344

1,484

1,578

1,820

2,273

2,743

2,519

2,547

2,789

2,729

256

294

253

199

224

202

214

231

246

222

320

416

559

569

767

658

318

236

326

456

115,868

143,441

150,261

151,176

166,097

171,280

183,950

194,099

204,073

205,228

231,606

267,541

320,200

370,086

427,107

461,294

425,428

387,649

398,186

427,732

8,872

10,254

10,836

11,474

12,103

12,613

13,926

14,122

15,063

15,420

15,894

18,460

20,333

24,050

28,014

32,681

31,840

30,193

30,676

30,493

1,233

1,645

1,103

991

1,042

1,634

963

1,139

1,182

2,190

1,711

2,268

2,301

2,835

6,832

2,986

-9

-536

963

1,251

1,105

856

931

997

949

1,185

1,162

1,306

1,359

1,658

1,637

1,662

2,116

1,951

2,275

3,085

3,010

2,641

2,297

2,323

105

136

124

125

104

104

265

266

190

411

420

392

649

486

479

1,108

916

857

567

551

1,001

720

807

872

845

1,081

897

1,040

1,169

1,247

1,217

1,270

1,467

1,464

1,796

1,977

2,094

1,784

1,730

1,771

7

5

6

5

6

6

5

6

6

6

12

14

17

25

49

26

9

9

12

12

10,400

11,600

11,337

11,384

11,782

11,638

13,140

13,669

13,968

15,468

17,912

18,464

20,867

22,692

28,164

30,155

27,857

21,027

22,647

23,467

1,415

1,503

1,298

1,304

1,376

1,494

1,536

1,635

1,903

2,214

2,288

2,353

2,590

2,496

2,847

3,951

3,508

3,137

3,055

2,993

[1] Noncharitable-use assets, also known as net investment assets, are calculated based on the value of assets not used for charitable purposes.

NOTES: Data were adjusted based on the chain-type price index for Gross Domestic Product as reported by the U.S. Department of Commerce, Bureau of Economic Analysis.

132

Tax Year 2004 is used as the base year for these adjustments. Detail may not add to totals because of rounding.

A History of the Tax-Exempt Sector: An SOI Perspective

Statistics of Income Bulletin | Winter 2008

Table 5. Excise Tax Data Reported by Private Foundations and Associated Individuals, Calendar Years

2003-2006, in Current Dollars

[All money amount are in current whole dollars]

2003

Item

Total tax [2]

Number of

returns [1]

2004

Amount

Number of

returns [1]

2005

Amount

Number of

returns [1]

2006

Amount

Number of

returns [1]

Amount

(1)

(2)

(3)

(4)

(5)

(6)

(7)

(8)

1,681

4,156,692

1,651

7,246,679

1,658

7,726,515

1,759

5,316,852

Individual tax on self-dealing

119

400,275

127

413,501

144

3,094,172

159

2,113,878

Tax on undistributed income

1,549

3,538,275

1,476

5,542,236

1,463

4,200,471

1,529

2,990,274

Tax on taxable expenditures

53

277,420

53

1,035,659

50

364,082

77

145,874

Tax on excess business holdings

4

96,081

4

269,112

4

56,948

7

65,682

[1] The total number of returns may not equal the sum of the number of returns for each tax, as an organization or individual filer may report more than one type of tax per return.

Additionally, individual filers may be included on returns filed by organizations.

[2] The total amount of tax may not equal the sum of the amounts for each tax, as certain excise taxes have been excluded to prevent disclosure of individual taxpayer data.

NOTE: Data represent information from Forms 4720 filed by organizations or associated individuals who identified themselves as Form 990-PF filers. These data generally represent

private foundations and associated individuals, but include information reported by nonexempt charitable trusts that are treated as private foundations for tax purposes.

133

A History of the Tax-Exempt Sector: An SOI Perspective

Statistics of Income Bulletin | Winter 2008

Table 6. Exempt Organization Business Income Tax Returns, Selected Financial Data, in Current Dollars,

Tax Years 1990-2004

[All figures are estimates based on samples—money amounts are in millions of current dollars]

All organizations

Tax year

Number of

returns

Gross

unrelated

business

income

(UBI)

Total

deductions

Unrelated

business

taxable

income (less

deficit)

Unrelated

business

taxable

income

(UBTI)

Deficit

Unrelated

business

income tax

(UBIT)

Total tax [1]

(4)

(5)

(6)

(7)

(8)

(1)

(2)

(3)

1990

31,091

3,511

3,513

-2

389

391

99

99

1991

32,690

3,385

3,333

52

431

379

117

117

1992

31,122

4,069

3,960

109

486

377

132

132

1993

32,638

4,694

4,479

215

604

388

180

181

1994

35,657

5,380

5,117

263

643

380

191

195

1995

36,394

6,280

5,787

493

893

400

277

277

1996

1997

40,621

39,302

7,295

7,809

6,619

6,903

676

906

1,170

1,375

494

469

372

418

373

423

1998

46,208

7,585

6,484

1,100

1,670

569

506

464

1999

42,151

7,722

6,835

887

1,485

598

423

422

2000

38,567

8,413

7,703

710

1,427

717

406

403

2001

35,540

7,900

7,883

18

792

774

226

222

2002

35,103

7,776

7,922

-146

647

793

194

193

2003

36,064

38,040

8,436

9,492

8,413

8,980

23

512

780

1,288

757

776

220

365

221

368

Number of

returns

Gross

unrelated

business

income

(UBI)

2004

Public charities and private foundations

Tax year

Total

deductions

Unrelated

business

taxable

income (less

deficit)

Unrelated

business

taxable

income

(UBTI)

Deficit

Unrelated

business

income tax

(UBIT)

Total tax [1]

(4)

(5)

(6)

(7)

(8)

(1)

(2)

(3)

1990

7,493

1,803

1,886

-83

116

199

33

33

1991

1992

7,846

8,666

1,643

2,312

1,717

2,392

-74

-80

141

162

215

242

40

47

41

47

1993

9,246

2,540

2,618

-78

187

266

55

55

1994

9,277

3,120

3,188

-68

219

287

65

65

1995

9,903

3,583

3,672

-89

202

291

61

59

1996

10,407

4,017

4,049

-32

299

331

94

94

1997

10,614

4,179

4,194

-15

337

352

105

103

1998

10,898

4,127

3,907

220

655

435

216

175

1999

11,614

4,002

4,053

-50

389

439

119

119

2000

11,497

4,780

4,829

-49

469

518

149

146

2001

12,618

4,812

5,080

-268

292

560

86

85

2002

12,803

4,721

5,006

-285

289

574

87

86

2003

13,511

4,833

5,001

-168

352

520

103

102

2004

12,395

5,501

5,388

112

636

524

192

191

[1] Total tax takes into account the unrelated business income tax, minus any tax credits, plus any other types of tax due.

NOTES: Forms 990-T with gross unrelated business income below $1,000 in current dollars, the filing threshold, are excluded from these statistics. Detail may not add to totals because of

rounding.

134

A History of the Tax-Exempt Sector: An SOI Perspective

Statistics of Income Bulletin | Winter 2008

Table 7. Exempt Organization Business Income Tax Returns: Selected Financial Data, in Constant

Dollars, Tax Years 1990-2004

[All figures are estimates based on sample—money amounts are in millions of constant 2004 dollars]

All organizations

Tax year

Number of

returns

Gross

unrelated

business

income

(UBI)

Total

deductions

Unrelated

business

taxable

income (less

deficit)

Unrelated

business

taxable

income

(UBTI)

Deficit

Unrelated

business

income tax

(UBIT)

Total tax [1]

(4)

(5)

(6)

(7)

(8)

(1)

(2)

(3)

1990

31,091

4,708

4,711

-3

522

524

133

1991

32,690

4,387

4,320

67

559

491

152

152

1992

31,122

5,155

5,017

138

616

478

167

167

1993

32,638

5,811

5,545

266

748

480

223

224

1994

35,657

6,526

6,207

319

780

461

232

237

1995

36,394

7,461

6,875

586

1,061

475

329

329

1996

40,621

8,506

7,718

788

1,364

576

434

435

1997

39,302

8,957

7,918

1,039

1,577

538

479

485

1998

46,208

8,609

7,359

1,249

1,895

646

574

527

1999

42,151

8,633

7,642

992

1,660

669

473

472

2000

38,567

9,212

8,435

777

1,563

785

445

441

2001

35,540

8,445

8,427

19

847

827

242

237

2002

35,103

8,173

8,326

-153

680

833

204

203

2003

36,064

8,681

8,657

24

803

779

226

227

2004

38,040

9,492

8,980

512

1,288

776

365

368

Number of

returns

Gross

unrelated

business

income

(UBI)

Total tax [1]

(8)

133

Public charities and private foundations

Tax year

Total

deductions

Unrelated

business

taxable

income (less

deficit)

Unrelated

business

taxable

income

(UBTI)

Deficit

Unrelated

business

income tax

(UBIT)

(5)

(6)

(7)

(1)

(2)

(3)

(4)

1990

7,493

2,418

2,529

-111

156

267

44

1991

7,846

2,129

2,225

-96

183

279

52

53

1992

8,666

2,929

3,031

-101

205

307

60

60

1993

9,246

3,241

3,241

-97

232

328

68

68

1994

9,277

3,785

3,867

-82

266

348

79

79

1995

9,903

4,257

4,362

-106

240

346

72

70

1996

10,407

4,684

4,721

-37

349

386

110

110

1997

10,614

4,793

4,811

-17

387

404

120

118

1998

10,898

4,684

4,434

250

743

494

245

199

1999

11,614

4,474

4,531

-56

435

491

133

133

2000

11,497

5,234

5,288

-54

514

567

163

160

2001

12,618

5,144

5,431

-286

312

599

92

91

2002

12,803

4,962

5,261

-300

304

603

91

90

2003

13,511

4,973

5,146

-173

362

535

106

105

2004

12,395

5,501

5,388

112

636

524

192

191

44

[1] Total tax takes into account the unrelated business income tax, minus any tax credits, plus any other types of tax due.

NOTES: Forms 990-T with gross unrelated business income below $1,000 in current dollars, the annual filing threshold, are excluded from these statistics. Data were adjusted based on

the chain-type price index for Gross Domestic Product as reported by the U.S. Department of Commerce, Bureau of Economic Analysis. Tax Year 2004 is used as the base year for these

adjustments. Detail may not add to totals because of rounding.

135