An article this week in the New York Times highlighted the push for coding education in public schools, starting as young as kindergarten. One featured nonprofit, Code.org, has the goal of getting every public school in the U.S. to teach computer science—and has the support of industry giants like Microsoft, Facebook, Google, and Salesforce.
The idea of using a nonprofit to advance a particular subject of education is not novel. However, this particular push has caused some debate over the extent to which industry should influence educational policy. In other words, are the needs of particular companies for skilled and reliable coders shaping education to be more narrowly tailored than it should be?
In tax speak, this type of potential self-interest is covered under the private benefit doctrine—which generally requires 501(c)(3) organizations to operate for the benefit of the public rather than private interests. However, the private benefit doctrine does recognize that some degree of private benefit is inherent in many charitable and educational activities. This type of permissible private benefit—which is a necessary part of the activity that provides larger public benefit—is called incidental private benefit.
In the coding context, the concern is that perhaps too much private benefit is going to industry, since it will reap the benefits of a population that is better educated to suit its needs and improve its bottom line. However, the benefit going to students and the general public is clear as well; students are being trained in an area where jobs are available, and the public in general ostensibly will benefit from increased and improved services and innovation.
A particular concern discussed in the article was a new Idaho law that reads in part that “It is essential that efforts to increase computer science instruction, kindergarten through career, be driven by the needs of industry and be developed in part with industry.” Critics are concerned that prioritizing industry demands could sway schools to teach specific computer programming languages that certain companies needed, rather than broader problem-solving approaches and skills that students could use more generally throughout their lives.
Like many other tax issues, private benefit analysis is very dependent on the facts and circumstances of each situation. The more it looks like a nonprofit is operating to benefit a particular company, or even a specific sector of industry, the more it looks like private benefit could be an issue. However, the IRS has ruled favorably in the similar area of self-dealing in circumstances involving a nonprofit that operated an engineering program that could benefit a particular industry donor, as that donor company would seek to hire graduates of the program. The IRS held there was no self-dealing (or improper benefit to the company) where the company was participating to a wholly incidental degree in the fruits of a charitable program that is of broad public interest in the community. The IRS emphasized that the company was one of many manufacturing businesses that could benefit from the skills acquired by the students in the program and that, because the corporation did not get preferential treatment, its benefit was incidental.
All in all, there is a good deal of flexibility for nonprofits that want to be involved in advancing coding education. While there clearly is an area of risk in providing special treatment to particular companies, there is a good argument to be made that benefit from this type of education primarily benefits the public and not private interests.
