4 ms·

Take Away Harvard’s Nonprofit Status

26 points by boh 12y ago

rgbrenner 12y ago
After reading the article, I guess I don't really have an opinion on the tax.. but is it really reasonable to tax endowments over $1B, if the school has $4.2B in operating expenses? Seems like they should be able to keep a larger buffer than 3 months. If the problem is "hoarding," then why have a fixed amount at all. Why not 1 year of operating expenses? That would encourage all educational institutions to spend more every year on ongoing expenses (like research).
- 0xffff2 12y ago
  Agree in principle, but 1 year seems low. Isn't the purpose of an endowment primarily to generate ongoing income? I think somewhere in the neighbor hood of 20 years worth of expenses would be more reasonable. (Assuming a conservative 5% return on investment, the endowment would not be taxed on capital required to generate 1 year of operating expenses in income each year.) Alternatively, perhaps a tax could be levied only on any income to the endowment beyond 1 year's worth of operating expenses.
alexdevkar 12y ago
The author notes (a) ways Harvard could spend its money that might have more public benefit and (b) that other non-profits are more deserving of donations. Even if all true, that doesn't mean it should be stripped of its non-profit status. Perfect management to optimize public benefit isn't the standard for whether an organization gets non-profit status. The more interesting argument is about what organizational traits our government should require in order to be blessed with special treatment.
joe_the_user 12y ago
I don't think there's much popular understanding how non-charitable an organization can be and still qualify as a non-profit. Essentially, to be a non-profit all you need is have a purpose other than profits and use your income to further that purpose. The purpose made to increase the profits of businesses in a certain industry and you still qualify. There's nothing in the definition that say "you must be good, benevolent and not greedy", all you need is purpose. See: http://en.wikipedia.org/wiki/Nonprofit_organization http://en.wikipedia.org/wiki/Nonprofit_organization etc.
- dragonwriter 12y ago
  > I don't think there's much popular understanding how non-charitable an organization can be and still qualify as a non-profit. OTOH, most people when they talk about "non-profit status" and, particularly, taking it away, are actually talking about "status as a 501(c)(3) non-profit charity to whom donations are tax deductible as well as the charity's own income being untaxed". Either because the equate "non-profit" with the more specific type of non-profit, or because they are talking about the specific non-profit status of a named institution that happens to be a 501(c)(3), so that referring to that particular institution's non-profit status (rather than non-profit status in general) is a reference to status as a 501(c)(3) specifically. As Harvard University is a 501(c)(3), this clearly applies in this specific case. Context matters.
  - omonra 12y ago
    Thank you, but I don't think you actually explained why Harvard fails to be a 501(c)(3)?
    - dragonwriter 12y ago
      Probably because I don't think it does fail.
logicalman 12y ago
This is a bad idea. Harvard, Yale, Princeton, and other well endowed schools spend more money per student than they receive from tuition. If they were for-profit institutions, they would be further incentivized to raise tuition.
cjensen 12y ago
Put more abstractly, "we should take money from successful nonprofit A even though A has done nothing improper because I disagree with A's goals and/or methods and think it's wrong that people continue to give A money." That's ludicrous. The hubristic desire to control others is extreme progressivism's worst attribute.

26 points by boh 12y ago

After reading the article, I guess I don't really have an opinion on the tax.. but is it really reasonable to tax endowments over $1B, if the school has $4.2B in operating expenses? Seems like they should be able to keep a larger buffer than 3 months. If the problem is "hoarding," then why have a fixed amount at all. Why not 1 year of operating expenses? That would encourage all educational institutions to spend more every year on ongoing expenses (like research).

0xffff2 12y ago
Agree in principle, but 1 year seems low. Isn't the purpose of an endowment primarily to generate ongoing income? I think somewhere in the neighbor hood of 20 years worth of expenses would be more reasonable. (Assuming a conservative 5% return on investment, the endowment would not be taxed on capital required to generate 1 year of operating expenses in income each year.) Alternatively, perhaps a tax could be levied only on any income to the endowment beyond 1 year's worth of operating expenses.

alexdevkar 12y ago

The author notes (a) ways Harvard could spend its money that might have more public benefit and (b) that other non-profits are more deserving of donations. Even if all true, that doesn't mean it should be stripped of its non-profit status. Perfect management to optimize public benefit isn't the standard for whether an organization gets non-profit status. The more interesting argument is about what organizational traits our government should require in order to be blessed with special treatment.

joe_the_user 12y ago

I don't think there's much popular understanding how non-charitable an organization can be and still qualify as a non-profit. Essentially, to be a non-profit all you need is have a purpose other than profits and use your income to further that purpose. The purpose made to increase the profits of businesses in a certain industry and you still qualify. There's nothing in the definition that say "you must be good, benevolent and not greedy", all you need is purpose. See: http://en.wikipedia.org/wiki/Nonprofit_organization http://en.wikipedia.org/wiki/Nonprofit_organization etc.

dragonwriter 12y ago
> I don't think there's much popular understanding how non-charitable an organization can be and still qualify as a non-profit. OTOH, most people when they talk about "non-profit status" and, particularly, taking it away, are actually talking about "status as a 501(c)(3) non-profit charity to whom donations are tax deductible as well as the charity's own income being untaxed". Either because the equate "non-profit" with the more specific type of non-profit, or because they are talking about the specific non-profit status of a named institution that happens to be a 501(c)(3), so that referring to that particular institution's non-profit status (rather than non-profit status in general) is a reference to status as a 501(c)(3) specifically. As Harvard University is a 501(c)(3), this clearly applies in this specific case. Context matters.
- omonra 12y ago
  Thank you, but I don't think you actually explained why Harvard fails to be a 501(c)(3)?
  - dragonwriter 12y ago
    Probably because I don't think it does fail.

logicalman 12y ago

This is a bad idea. Harvard, Yale, Princeton, and other well endowed schools spend more money per student than they receive from tuition. If they were for-profit institutions, they would be further incentivized to raise tuition.

cjensen 12y ago

Put more abstractly, "we should take money from successful nonprofit A even though A has done nothing improper because I disagree with A's goals and/or methods and think it's wrong that people continue to give A money." That's ludicrous. The hubristic desire to control others is extreme progressivism's worst attribute.