This sounds like a real kick in the nuts.
Ordinarily, nonprofits don’t pay federal taxes on their income – and that includes most colleges. But under the Senate’s tax bill, royalties generated by nonprofits based on their names and logos will be taxed. It could be a large hit to universities with popular athletic departments that generate lots of money through merchandise sales…
The government expects to collect $2 billion over 10 years with the provision.
Damn it, schools work hard to keep that money all to themselves. Doesn’t the Senate realize Uncle Sam’s name isn’t on the front of the jersey, either?
Get The Picture 
Actually, the abuse of non-profit organizations is one of the biggest financial misdeeds currently allowed to exist by our laws. Every professional athlete, every movie star, every recording star, every wealthy industrialist, basically every rich person, in our society his his/her personal 501(c)(3) to sock away money and to use to raise money–and it stays under that person’s control. They then invest it and the money grows unhampered by those pesky taxes that the rest of us have to pay. All the while the rich person gets to “manage” the assets for a fee he/she pays him/herself; gets to hire his/her best friend/father/mother/sister/brother to run the thing at a salary of $1 Million per year and basically have control over the money exactly like regular owned assets. Then people in the media write stories about how wonderful that rich person is because once in a while he/she gives a grant to save whales or study the mating habits of toads, all the while that same person uses the money as if it were his/her own–which it really is–albeit totally UNTAXED.
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If the salaries paid by 501(c)(3) are taxable as income and the only distributions that aren’t taxable go to charitable institutions or causes, I don’t see the problem.
If Trump starts one of these you will have people who want to please him who give him say, 100k. The organization then gives the United Way that same 100k and Trump gets a photo op and a rep as a good guy. What’s the problem? A guy bought influence and a guy made a donation of some one else’s money. So what?
Obviously it, like every other thing, is ripe for abuse, but I don’t have an issue with the construct at least as I described it. It is possible my construct is wrong.
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Assuming Mayor is right in the structure, the dodge is in moving the income tax payment to a lower bracket tax payer. The athlete (w/ a very high marginal rate) putting the $$ into the charity and then the spouse, kids, etc. paying income taxes at a much lower rate.
I’ve often wondered if this is why every athlete creates a foundation that at best hosts an annual golf tournament but otherwise doesn’t do anything of note.
I’m guessing there are other reasons for it…you could have the charity pay for travel for “board meetings” and such (ala Don Imus).
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I have a hard time getting my panties in a wad over this:
Bill sells a book or gives a speech for $x
Bill reduces his taxable income by donating Y to Bill’s foundation.
Chelsea works at the foundation and makes Z as a salary which is taxed as regular income.
Bill donates the balance minus expenses to qualified charitable interests.
The problem that I see is doing what Trump would do and have the foundation pay his business’ legal settlements and for art hanging at his country club. That’s abuse.
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The problem is when you look at the Foundation’s tax return and the expenses of the foundation are 97% and the amount contributed to other charities is 3% it is a sham.
Remember too that these foundations are the way the wealth escape estate taxes. The Estate tax doesn’t fall on the average person but it can kill a person who owns a medium sized business or a working farm on valuable property. This is why most small to medium sized businesses and farmers must have life insurance just to pay the Estate tax when they die. The IRS will take the business and/or farm for the tax. Famous case in Atlanta many years ago where two brothers had a family farm right on the Chattahoochee River. They had no other descendants. When the first brother died the second brother who was in his 80’s was going to have to sale the farm to pay the Estate tax. A local congressman stepped in and arranged for the brother to donate the property to the government but only after his death. If the congressman had not stepped in the IRS would have sold the property and kicked the old man to the curb.
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“A guy bought influence and a guy made a donation of some one else’s money. So what?” Been reading about what has been going on with the Clinton foundation? The whole 501(c)(3) thing smells. It’s a tax dodge. All of ’em should be taxed.
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I don’t understand how it’s a “tax dodge” if the end recipient is a charity.
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Query what proportion of the organization’s revenues (donations) is spent on the organization’s charitable purpose? If more than an insubstantial percentage (roughly 15%) is spent on non-charitable purposes, it’s supposed to lose its charitable status. And, and, no part is supposed to be spent on influencing legislation or elections. Of course the devil is in the details of what a clever lawyer can argue are expenditures for charitable purposes. What did Clelsea do to earn her salary? Is the salary the same as in similar organizations?
Lot of this stuff is observed in the breach. I’ve lost count over the years of how many mailings I’ve received from right and left begging me to send my tax deductible dollars to help them slay the beast.
The problem with charities isn’t so much what Mayor describes above, because once the money goes in it’s hard to get out for private purposes like leaving to the family. The problem with charities is abuse by stretching charitable purposes beyond recognition.
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Right HB. 501(c)(3) money is being spent under the table for all sorts of political and nefarious purposes and without a federal audit no one is the wiser. The Feds don’t have the manpower to audit them all and certainly not on a regular basis. And if Mr. Rich gets to avoid paying taxes on his dough through this maneuver then who do you think makes up the difference? You and I do– or our children and grandchildren when the deficit finally comes due.
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How about if the “charity” uses the money to buy ads supporting political candidates, particularly ones you oppose?
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Politics ain’t charity. If that’s allowed it’s because the Supreme Court decided, wrongly, that corporations have “free speech rights.” Stupid, but its what they did.
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The Supreme Court said no such thing.
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Mayor the statute says nonprofits, of which charities are a subset, cannot use their funds for politics, but it’s a rule frequently observed in the breach.
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Exactly. Non-profits are spending lots of dough on politics and hiding behind the anonymity provided by the Supreme Court’s Citizens United decision.
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Citizens United has nothing to do with this problem. Please read some different opinion.
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I agree. Do away with 501(c)(3). If you want to donate you can. If not that’s fine too.
It’s not that I don’t believe in the causes. It’s that the tax savings props up the pockets of a select few.
Besides, Uncle Sam can always put the extra tax revenue into education; that money isn’t gone from the economy. However, it’s being funneled through the Treasury Dept instead of through private citizens named Emmert, etc.
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The principle of the current law is admirable: if an organization is allowed to be tax exempt or charitable (there’s a difference) it is not allowed to expend funds on politics. OTOH that rule is such a sieve, like Prohibition, we might as well repeal it and collect the tax.
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ADs getting hit with the loss of the deduction for donations for tickets and then paying taxes on portions of their revenue.
How did college football get out of sync with conservative tax policy?
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I blame Bobo.
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Hillary, Bill? Trump? True nonpartisan efforts here.
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I wonder if Army/Navy/Air Force are going to be paying too..
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If I had to bet the mortgage, I’d wager this gets changed in the final version.
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Don’t bet the mortgage that your mortgage interest deduction is safe, though.
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It amazes me that the gov’t can find multiple new venues for increasing its revenue. But, reducing its expenses is an endeavor that no politician can comprehend.
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I’m not starting a fight, Tn, but new revenue streams are half the picture. Spending can be reduced. Period.
This is an example only. If California,
New York, Maryland, et al, want to be sanctuaries for illegal immigrants, funf their college education and give them health coverage, fine, that’s their business and none of mine. Assuming they can pay for it with local tax revenues, mind you. Federal tax dollars should not be forwarded to states that ignore Federal law. Period.
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Not “fine” by me, you cannot pick and choose the laws you want to obey, but I am with you about making them responsible for paying their own bills. Don’t come back and beg to be b ailed out for your own stupidity, not deduct federal tax dollars to pay for your excessive spending via high state taxes.
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The governments official position on taxation, regulations and subsidies.. If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.
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$2 billion over ten years is less than a rounding error in the federal budget. It’s molecular level.
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The NFL used to claim non-profit status.
Abuse is nothing new, here is article from 2005 quoting W’s IRS chair Everson:
http://www.washingtonpost.com/wp-dyn/articles/A26388-2005Apr4.html
Everson said that the IRS is finding problems in virtually every type of tax-exempt organization. Nonprofits include not only charities, but colleges and universities, many hospitals, pension plans, trade associations and think tanks. In fact, eight of the 10 largest private employers in the District are nonprofits.
“Unfortunately, we have no precise way to gauge the revenue impact of these issues,” Everson said, though he noted that the nonprofit sector, including pension plans and the like, now totals roughly 3 million entities controlling $8 trillion in assets.
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^^This is exactly what I was talking about above. There are so many and the abuse is so pervasive the Feds cannot control it. If we are really supposed to be getting tax reform this is the first thing that should be disallowed–not the personal exemption or the interest deduction on your home mortgage.
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Geez, Mayor, where’s your micro economics? Taxing every charity and non-profit tomorrow does nothing for middle America. Your “throw the bums out” mentality towards charities is miss-placed. Sure, The Clinton Global Initiative is run by liars but The Salvation Army does what it says it will do. Is the world better off with both or neither? I say both.
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Interesting you mention the SA. There is plenty of info published online about ALLEGED corruption in the SA. A close family member of mine worked for the SA for 25+ years, he is retired now, lives in a multi-million dollar home(s), owns multiple vehicles, travels all over the world.
Ironically, I’m playing golf today on the private course in his very private community. It’s none of my business where the money came from and I’m (trying) not passing judgement. He is a very savvy investor and its quite possible that’s where the money came from. Just stating some facts from my personal experience.
Final thought is, I believe the Mayor isn’t saying all charities should be taxed, he’s saying stop the pervasive abuse of non-profit/charity tax status that is going on. Ok let’s get back to football please.
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Let’s get this straight a real charity ie the Salvation Army is just that a charity. What is being abused are the “Private” Foundations. This was set up for a good purpose but as we all know the Law of Unintended Consequence plus really good tax lawyers will subvert even the best of intentions. There should be no “Private” Foundations. If Warren Buffet or Donald Trump want to donate a Billion dollars great let them do it personally to the charities of their choice, just not through a tax sheltered foundation.
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“royalties generated by nonprofits based on their names and logos will be taxed”
Meaning, the cost of licensing names & logos will go up and the consumer will pay the tax.
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