Year of Publication



Martin School of Public Policy and Administration

Executive Summary

This study was inspired and given its basic research design by a study conducted in 1985 by Charles T. Clotfelter, which sought to explain charitable giving by both individuals and corporations in relation to federal tax policy. Clotfelter determined that federal tax policy did influence charitable giving by corporations. The issue to be addressed here is, do the Clotfelter findings still hold true today?

The focus of this current study is on charitable giving by corporations only and the dataset was built from the same IRS Statistics of Income that Clotfelter used. Additional data were added from the Bureau of Labor Statistics. There were a total of nineteen industries included and the years focused on were 2005-­‐2009. The data were analyzed using two pooled time-­‐series models. The first model used ln charitable contributions as the dependent variable and unemployment rate, number returns, ln total assets, ln cash, ln total income tax after credits, and ln noncash expenses as the independent variables. The second model was identical to the first but added four dummy variables, INDUSTRY_7, INDUSTRY_11, INDUSTRY_15, and INDUSTRY_18, to control for industry.

The initial findings from the first model indicate that total income tax after credits and noncash expenses are statistically significant with positive effects. However, in the second model that accounts for specific industry, those monetary variables (total income tax after credits and noncash expenses) are no longer significant. INDUSTRY_11 is statistically significant with positive effects and INDUSTRY_15 is also statistically significant but with negative effects. Overall, it is industry that matters the most.

Further analysis of the industry effects on charitable contributions among corporations is recommended in order to provide a better understanding of why some industries are more generous than others. It is also recommended that the dataset be expanded to cover a broader range of years and to catch the affects of marginal tax rate in conjunction with industry.