The SC Benefit Corporation Act

In his inaugural address, Pres. George H. W. Bush borrowed a phrase from C. S. Lewis when he described charitable organizations as “a thousand points of light . . . spread like stars throughout the Nation, doing good.” He promised increased governmental support for those private organizations who exhibited the ideals of “duty, sacrifice, commitment, and a patriotism that finds its expression in taking part and pitching in.”

He believed that the vast number of existing charities are in a much better position to provide targeted relief on a local level. Rather than pour more money into huge government programs, he pushed to create more public-private partnerships that would support these local charities. His son, Pres. George W. Bush, continued his father’s legacy by declaring that “compassionate conservatism” would be a central part of his presidency until his efforts were overshadowed by the events of September 11, 2001.

While these efforts attempted to decrease the role of government, conservative critics observed that distributing tax money through charities was no different than distributing it through government agencies. Either method results in forced redistribution of wealth.

In an ideal society, private citizens and businesses would fully assist the needy, either directly or through charitable organizations without any governmental involvement. Unfortunately, we do not exist in such a society and with the recent recession, societal problems have grown.

Even so, Americans donated $291 billion to charity in 2010 according to The Center on Philanthropy at Indiana University. In spite of the recession, this was a 3.8% increase over 2009. Remarkably, American generosity actually exceeded the total profits of $230 billion reported in 2010 by the companies that make up the Standard & Poor’s 500 stock index.

The government encourages American generosity by granting an income tax deduction for charitable donations. Though some liberals claim that these tax deductions are a type of government subsidy and should be abolished, most Americans, both individuals and businesses, are grateful that the government acknowledges their sacrifice for the greater good.

If we believe that private donations to individual charities are the most efficient way to solve societal problems, then we should expect government to create laws that enable that possibility. This belief has prompted several states to recently pass laws enabling corporations to designate themselves as Benefit Corporations.

Benefit Corporation status allows the board of a corporation to publicly state a corporate purpose beyond making a profit. The corporate purpose must be a material benefit to the public good and can be broadly defined. This status has no tax implication for the corporation, but rather allows a corporation to prove their contribution to society through a third-party audit. I have introduced legislation that would create this opportunity in South Carolina.

Our current level of national debt affirms that we simply cannot afford to fund welfare support systems with money borrowed from future generations. The era of big government social programs has passed, which leaves us looking for new ways to address the problems resulting from high unemployment and a stagnant economy. Inventive legislation that unleashes the generosity of Americans will be necessary to fill that void.

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