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Should non profit organizations be taxed?

Hi Schad,

There are many types of nonprofits, and I'm not referring to their function/purpose, but rather in the way tax law applies.

For example, contributions to a 501(c)(3) are deductible by the donor. So rather than taxing the 501(c)(3) just make the contributions non-deductible to arrive at pretty much the same place without the paperwork costs to all of filing additional tax returns.

For other types, the contributions are not deductible. Like a neighborhood co-op where residents pool their money to make improvements such as adding sidewalks or repairing the neighborhood water system.

For those like 501(c)(3)'s, who are supposed to serve a good purpose for society (think art museum) what is the point of having Uncle Sam take a "piece of the pie"? It would just result in fewer works of art to be shown, or fewer hrs of operation. That w/b poor policy and lacking in justification IMHO.

For those like co-ops, where the contributions are not deductible by the donor, to tax the co-op would effectivly mean double-taxataion. Which is a "no-no". You see, the contributions are "after-tax dollars", so to again tax the contributions at the co-op level w/b DT. A most inefficient means of doing neighborhood repair work. It would also be an issue of "form over substance". Why should there be any difference in the treatment between (1) neighbors each writing a check out of their accounts to the contractor (in this case, no co-op and no extra level of tax) and (2) neighbors pooling together to open one account under the name of the co-op to collect the funds and write one check to the contractor.

I have prolly not taken the question the way you intended, but I'm a tax cpa and can't help but respond like one 🙂

Fern
 
No. Except in the case of the NAACP and many churches which tend to force political matters down the throats of their followers.
 
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