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Think of nonprofit not as another term for benevolent or charitable organization (which is what people instinctively think), but as an alternative tax accountin
by jackfoxy 3y ago
Think of nonprofit not as another term for benevolent or charitable organization (which is what people instinctively think), but as an alternative tax accounting scheme. Excess revenue gets funneled to the insiders at the top so that at tax year end there is no profit. Presumably these insiders are paying income tax.
I once knew a guy who worked in the field of providing services to non-profits, and he described to me the lavish retreats provided to people in the industry, the first-class air travel and five-star hotels provided for travel. He called it the charitable industrial complex.
Take a hard look at the tooth to tail ratio of the organization the next time you make a charitable contribution.
- bombcar 3y agoIt's quite likely that if you have two organizations - one setup as a for-profit company, one setup as a non-profit, that the government gets more taxes from the non-profit because the for-profit company can "reinvest profits" into whatever, driving the share prices up, which is (if done right) is a non-taxable event for everyone, as long as the shareholders don't sell. Whereas the non-profit that funnels excess into income for the insiders has that income taxed at income-tax levels.
- carlosjobim 3y agoCan non-profits not reinvest income just as any other business?
- bombcar 3y agoThey can - what (at least some) cannot do is stockpile cash at more than a certain amount (which I don't know what it is, but something like 1x yearly run-rate or something). So buying equipment or spending it on marketing, OK. Saving millions in the bank or investing - not OK.
- carlosjobim 3y agoThanks for the explanation! So that means they can reinvest and grow their business just as much as for-profit businesses, then? If a for-profit saves millions in the banks, that will be taxed, as it is a profit at that stage.
- jackfoxy 3y agoThe insider class gets its lifestyle boosted to aristocracy tax free because it is all for business, or rather operating expenses.
- deleted 3y ago[deleted]