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It is only a confusion of terminology. They have a lot of revenues which they spend before they can be taxed, so they declare a lot of expenditures but no profi

It is only a confusion of terminology. They have a lot of revenues which they spend before they can be taxed, so they declare a lot of expenditures but no profits. Many charities and religious institutions work like this.

001sky 13y ago
This is true, to an extent. By design so-called "non-profits" are truly just restricted from paying dividends (which can only be paid from profits). This is illsutrative, however, in the broader sense most taxable corporate entities forgo dividends for a variety of reasons. That is to say, they find the payment of dividends to required subsequent re-capitalizations via finacial markets to have economic entropy. Companies retain their profits, as a result, for the benefit of management (avoiding market benchmarking) and to a lesser extent, shareholders. A non-profit and a for-profit company are not that much different it turns out once this is considered a point of equivalence. If you take that argument to its logical conclusion, its makes sense also not to pay taxes (more operating cash flow retention). Thus, from the perspective of principal-agent theory, an eefficientnon-profit structure fully capitalized and run equivalently a "non-dividending" but "operating profit" maximizing entity. The purpose of maximizing revenues less costs is to opportunistically extract economic rents.
ozi 13y ago
This is a late reply, but your point is exactly spot on and why I assume all of us are "hackers." In America at least, when you're an employee you don't get to decide when you pay taxes. Taxes come off of the top and THEN you get your earnings which can be reimbursed later if you qualify for a credit. There has always been an advantage as a business of being able to spend money and pay taxes later on whatever is left. But complaining about this in the case of the NFL is just silly because it is an advantage enjoyed by literally every business making enough money to justify itemizing their tax return (which isn't much).

001sky 13y ago

This is true, to an extent. By design so-called "non-profits" are truly just restricted from paying dividends (which can only be paid from profits). This is illsutrative, however, in the broader sense most taxable corporate entities forgo dividends for a variety of reasons. That is to say, they find the payment of dividends to required subsequent re-capitalizations via finacial markets to have economic entropy. Companies retain their profits, as a result, for the benefit of management (avoiding market benchmarking) and to a lesser extent, shareholders. A non-profit and a for-profit company are not that much different it turns out once this is considered a point of equivalence. If you take that argument to its logical conclusion, its makes sense also not to pay taxes (more operating cash flow retention). Thus, from the perspective of principal-agent theory, an eefficientnon-profit structure fully capitalized and run equivalently a "non-dividending" but "operating profit" maximizing entity. The purpose of maximizing revenues less costs is to opportunistically extract economic rents.

ozi 13y ago

This is a late reply, but your point is exactly spot on and why I assume all of us are "hackers." In America at least, when you're an employee you don't get to decide when you pay taxes. Taxes come off of the top and THEN you get your earnings which can be reimbursed later if you qualify for a credit. There has always been an advantage as a business of being able to spend money and pay taxes later on whatever is left. But complaining about this in the case of the NFL is just silly because it is an advantage enjoyed by literally every business making enough money to justify itemizing their tax return (which isn't much).