After Kelo, if Private Development is a Public Purpose, Then Why Isn’t Private Development Charitable?–

I have been thinking about the ancillary effect of Kelo on other laws and on law firms, such as:

1. What is a charitable use entitled to exemption from income and estate taxes?

2. What is the meaning of pro bono for law firms?

As background consider this crucial portion of the majority opinion in Kelo:

[P]etitioners urge us to adopt a new bright-line rule that economic development does not qualify as a public use. Putting aside the unpersuasive suggestion that the City’s plan will provide only purely economic benefits, neither precedent nor logic supports petitioners’ proposal. Promoting economic development is a traditional and long accepted function of government. There is, moreover, no principled way of distinguishing economic development from the other public purposes that we have recognized.

The law of charitable uses has a catch-all category for “Any other matter beneficial to the community.” Under this umbrella, for example, gifts to the government or gifts to non-governmental entities for cemetaries are recognized as charitable.

After Kelo, “There is . . . no principled way of distinguishing economic development from the other public purposes that we have recognized.” So, following Kelo, private development is a “public purpose” with general “public . . . benefits.” Hence private development should qualify for charitable deductions, and whoever gets the condemned property (Wal-Mart?) can treat its income from the development as nontaxable income.

Hmmm, . . . makes perfect sense, right? Or if it doesn’t, then maybe you don’t buy the Supreme Court’s claim that it can’t figure out how to separate private development from public uses and public purposes.

I’m sure that one of the many surprises of those reading the Kelo decision was the discovery by corporate law firms that most of their work for private clients is pro bono publico (meaning “for the public good”)–at least the work that makes their clients richer and causes them to report more income and pay more taxes. I think, however, that advice that leads to less economic development or to paying less taxes would not qualify as a public purpose and thus would not be pro bono publico. So now most of the work of most business law firms is pro bono–right?

Or again, maybe you don’t buy the Supreme Court’s claim that it can’t figure out how to separate private development from public uses and public purposes?