Gerardo, Having served as the treasurer of a non-profit 501(c)(3) tax-exempt organization for over a decade, I have to disagree with two statements in your post.
>>...non-profit organizations, which do not pay taxes not because they are tax >>exempt, but because they do not have profits, you see, non-profit... "Non-profit" does not mean "has no profits". It means "cannot DISTRIBUTE profits to other entities" (who would then be treated as receiving income from the non-profit). A non-profit organization is actually allowed to make as much profit as it can. (Obviously, at a bare minimum, it has to break even in order to survive.) What it cannot do is pass on those profits on to owners, shareholders, or similar entities. Instead, the profits are required to be retained for use by the organization in furtherance of the purposes stated in their articles of incorporation, charter, and/or by-laws. Any inappropriate use would render the organization's management liable for charges of malfeasance, misfeasance, and other nasty thangs. For instance, if the Philly Art Museum makes a profit, they're required to put those profits into acquiring and displaying more art, providing more art education services, maintaining the museum building, etc. >>...tax exempt religious organizations, that is really different, they do make >>a profit and they do not pay taxes... Tax-exempt organizations -- be they religious, charitable, educational, fraternal, or any of the other varieties recognized by the IRS in section 501 of the Revenue Code -- are only exempted from SOME taxes and fees, not all of them. They are exempt from paying Federal income taxes. (Though they have to file forms w/the IRS just like you and me.) In some states and localities, but not all, they are also exempt from paying state/regional income taxes. Some states also exempt them from paying sales tax on their purchases. And many localities give them an exemption from real-estate taxes. Other than that, they are generally subject to the same taxes, fees, and license charges as a for-profit business. For instance, if they have employees, they still have to pay the employer's share of Social Security and Medicare taxes. If they have a cafeteria or gift shop, they have to collect sales tax and turn it over to the state. In that sense, contrary to Bill's claim, almost every tax-exempt organization is actually a "...tax paying, instead of tax consuming entity." They don't pay to the same extent as a for-profit company, but they DO pay. But the real issue here is this: If the nature of a non-profit business means that it is responsible for collecting a local tax or fee, and it fails to do so, it can be held legally responsible. It may be that management failed to do due diligence, didn't understand what they were doing, got bad legal/accounting advice, or just didn't care. Or, as in this case, a recent court decision rendered their previous approach null and void. If Philly CarShare had chosen play it safe from the start -- to collect the local car rental fee from its users, and turn that money over to the city -- they wouldn't be in their current fix. However, they might also have had far fewer rentals and gone under as a result. On Aug 10, 2011, at 2:10 AM, Gerardo Razumney wrote: > Do you mean to say that for profit, commercial entities actually pay for > Police and Fire services? I don't think so. They pay as much as non-profit > organizations, which do not pay taxes not because they are tax exempt, but > because they do not have profits, you see, non-profit... If you or me do not > make enough money to pay taxes we get the same service. It has nothing to do > with the status. Now if you talk about tax exempt religious organizations, > that is really different, they do make a profit and they do not pay taxes, so > they do get free services. > > Gerardo Razumney > > On Tue, Aug 9, 2011 at 8:33 PM, William H. Magill <[email protected]> > wrote: > > On Aug 9, 2011, at 1:23 PM, maru ca wrote: > > > > > On Aug 9, 2011, at 11:52 AM, William H. Magill wrote: > > > >> In any event, it is good to see that Private Enterprise has decided to > >> "support" the shared vehicle model and be a tax paying, instead of tax > >> consuming entity. > > > > > > > > ^^^^^^^^^^^^^^^^^^^^^^^^^^^^ > > > > Now this piques the curiosity. > > > > > > In what way was PCS a "tax consuming entity"? > > They get/got all of the benefits of city services (whichever they were) > without paying for them … Police, Fire, Trash… > > Virtually all Non-Profits consume tax dollars because they depend upon City > Services. Consequently the Tax Payers of the City get hit twice by them… > > Entities, like the University of Pennsylvania, who have their own Police and > Trash services, relying on the city only for Fire services are a different > issue. They don't consume tax-paid services to the same extent, but do exempt > massive chunks of property from Real Estate Taxes. (That I know of, both > Penn and Temple have "sworn" Police Departments, i.e. they have full arrest > powers. I don't know the status of Drexel's force currently.) > > There are undoubtedly a few non-profits who do pay taxes, (and I realize that > "non-profit" and "tax-exempt" are not the same thing, but the sets overlap a > huge amount), but they are usually viewed by everyone but the Taxman as the > same thing, and act as if they are exempt. … which is apparently how > PhillyCarShare got into the predicament it wound up in. > > T.T.F.N. > William H. Magill > [email protected] > [email protected] > [email protected] > > > > > ---- > You are receiving this because you are subscribed to the > list named "UnivCity." To unsubscribe or for archive information, see > <http://www.purple.com/list.html>. >
