Submitted by Nergaal t3_1135f9j in technology
Badtrainwreck t1_j8towtc wrote
Reply to comment by voyageur77 in Elon Musk donates almost $2bn of Tesla shares to charity by Nergaal
It’s not rich people bad, it’s not about buying a yacht for wealthy person to use, you’re using my thrown out example to explain to you the basics of something as literal.
People and organizations with a lot of stocks, use that stocks to buy an asset, they then take loans against that asset. Nothing stops a nonprofit from buying property, nothing says they can only own specific assets.
investing in property is a normal way to protect wealth. It’s not rich people bad, it’s this is what’s normal. You might not like it but the difference between a nonprofit and a profit driven organization is that a for profit institutions goals is to increase profit for its shareholders. A nonprofit can do the exact same but instead be used to drive wages for the workers.
I’ve remodeled a nursing home which no longer existed but their paperwork was still there, that’s how I learned the not for profit was being used to fund the director because the director purchased the property the nursing home operated on, the nursing home took care of all maintenance and costs, and the director just took a large amount in rent. Very legal, very normal, very much a for profit hidden as a nonprofit
voyageur77 t1_j8tuh1e wrote
How does that avoid any taxes? The director has to pay taxes on the rent received from the non-profit, while the non-profit has no use for deducting rent expenses.
Non profits are not allowed to own whatever investments they want and do whatever they want with the money, look up Unrelated Business Taxable Income for example. A charity that is controlled by some rich guy will only qualify as a private foundation instead of a public charity. It is then not allowed to own a large amount of stock, and not allowed to pay high salaries or rent to the family members. It must operate exclusively for charitable purposes, it cannot act to favor the family's business. All the income and spending goes on Form 990 for the IRS to see.
The IRS isn't dumb. The scams you're describing are tax fraud and they will get you audited. There are hundreds of pages of IRS rules against this kind of stuff.
turtlejelly1 t1_j8tyll1 wrote
The IRS is not dumb but they have to work within the legal system. The system has flaws. Wealth can navigate flaws and unfortunately take advantage of it while the IRS watches.
Badtrainwreck t1_j8u4fo2 wrote
Some of what I’m saying is the expression of parts of the system, not that every part of it “avoids taxes” we are talking about 501c3s as a whole. The avoiding taxes is from a part of the discussion where instead of my dying and leaving you a company which is at risk of the estate tax, I can create an entity which I give you control over and it avoids the tax, because it’s not longer inheritance it’s just transferring control of the create entity.
The IRS says you can be reasonably compensated, but again this isn’t the point or the issue, because what billionaire is “reasonably compensated” because Jeff Bezos is paid 88,840 but is that the limits of his worth? If salary is the end all be all then I’m absolutely wrong, but if you’re a major shareholder of a company, and you donate money as a write off to a company that then spends that money on increasing the value of your asset, raising the value of the charitable work they do on the books and they transfer that into stronger lobbying ties then you’re still using a nonprofit in a legal way that is still in your own interest.
That’s the problem, not billionaire bad, not system broken I now cry, but nonprofits have almost no real oversight and there are plenty which operate as if they are for profit organizations.
This is just about the fact that there is a real system in which nonprofits can be useful for enriching yourself
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