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Re: Flying Silos; Rendering unto IRS

May 27, 1997 04:37 PM
by Eldon B. Tucker


>It is my understanding of the current tax code that, should an
>organization "charge" for a function, the funds collected become
>taxable.  If the same function is financed by "donations," no
>tax liability accrues.  In the former case, the organization's
>tax-exempt status might come up for investigation; in the latter,
>the question does not arise, nor would it arise if the function
>were gratis.  If my understanding is incorrect, I welcome

I'm not sure you've got it right regarding non-profit organizations.
An non-profit group can conduct business and charge for goods
and services. It can make a profit on what it does. If the profit
is related to its charitable purpose, it is not taxable. If the
profit is unrelated, it is taxable. Point Loma Publications, for
instance, would not pay taxes on the profit from its book sales,
but would owe taxes on any stock or interest income it might have.

What distinguishes an non-profit organization is a matter of
ownership. A private business is owned by private individuals;
all assets, profits, etc. belong to them. A non-profit group is
"owned" by the general public, by the common good, and should it
ever dissolve, all its assets must be turned over to another
non-profit group.

The basic difference is that a non-profit group is owned by
"the common good", by the public in general -- the distinguishing
characteristic is not in how it conducts business or charges fees.

-- Eldon

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