I believe being “non-profit” is a ploy to get government funding and grants. We have roughly the same opinion of the term, we only vary slightly in the details.
I believe there are some who take advantage of their non profit status, some hospitals and boards who manage them often do in our area it seems for financial gain. But, there is a definite place for them. From road associations to clubs to the incorporated Red Cross to a variety of small not for profit non incorporated but not insignificant to their members, are entities that would not exists otherwise.
I bet many of us have belonged to a bunch of incorporated and non incorported not for profit entities.
I think I have lost count. One in particular, a beach club which I was a board member of for twenty five years are outstanding places to raise kids and provide services that would be unaffordable for it’s members if they were for profit. Private, for profit services of this type are so engrossed in making a profit, they become unaffordable for the average person and leave the members with little or no control of their management. No, I understand the problems but the good has far outweighd the bad in those I know of.
Our non profit road and lake association which takes regular advantage grants and govt aid by law must reform every year by majority vote to maintain it’s status. We could never afford to do what we do and provide the services we do if private for profit. Private holdings with similar responsibilities are comparative dumps and the amount of money spent by the tax payer to govern, clean up and oversee makes it much greater problem to deal with them.
I vote for their retention. For profits at their worse, maim and kill in the name of proit and under corporate law, are protected from private intervention except by class action which can take years to resolve. Non profits by law are held much more accountable to the public at large and those who depend on them to maintain their status. One of the big advantages of non profit status, is greater accountability and service to their members.
Some are worth keeping and are quite effective…a list of a few.
You’ve made an excellent point Dag, and the Red Cross is an excellent example. There truely is a place for nonpprofits. As regards hospitals, St Joseph’s Hospital for Children and Shriner’s Burn Institute are excellent examples of organizations that deserve to call themselves nonprofit.
The more I think about it, the more I realize just how worthy nonprofits can be.
Some of you guys missed my point. “Not for profit” is not the same as “non profit”. “Not for profit” does not enjoy a tax exempt status, “non profit” does.
Many states do not recognize a “not for profit” status. I really don’t see the advantage for having that status even though I used to work for one. It was almost a disadvantage when doing business with government owned (city owned or Co-ops) utilities in states that do not recognize the status, they have trouble auditing a not for profit company, but most of those government owned utilities from those states just audited us as a for profit.
I find myself bewildered. I always thought Not For Profit was another way of saying Nonprofit. What’s the difference?
Non profits get most of their income from donations though they may sell trinkets at some greatly inflated price in order to stimulate donations. If the trinket is of insignificant value compared to the cost, then the whole transaction can be considered a donation for tax purposes.
Not for profits usually provide a product or service at a minimal markup. Their purpose is not to generate a profit, but they cannot exist if they lose money. Typically they are a captive corporation. They are started by another organization and may be owned by that organization for the sole purpose to provide the product or service to that organization.
I used a COOP as an example but that actually is not entirely accurate. While very similar, there is a difference between a COOP and a not for profit. I am not an accountant or lawyer so I cannot tell you all the differences, they are very subtle.
Want complicated, the company that I worked for was a not for profit that was owned by a consortium of electrical COOPs in another state.
It seems, according to this article that legally, they are the same, Same. But, the IRS which has if own set of definitions, sees it differently. I think it safe to say that we can all be right and we can all add to the confusion…unless we work for the IRS.
Maybe a little less broad brushing everything. There are large and small same as companies and good and bad. I can assure you that our 503© association is an IRS status and requirement. Our lawyer board member in 1929 failed to register our association. Thus, we had to go through the whole IRS thing again at some expense. No one gets paid and we barely cover expenses, and receive no government help or grants. They used to plow the access road but that changed years ago when the plow driver retired.
A great many people associate “non-profit” status with bona-fide charities such as Salvation Army, etc. But a close look at MADD, American Cancer Society, numerous hospitals and highly emotional causes such as last wish foundations are cash cows for the administrators who pull tears and cash from the public and in return spend 15% on those they profess to help.
My state representative operates a charitable(?) organization
http://djournal.com/view/full_story/16678063/article-Aldridges-back-in-court-over-woman’s-assets?
He enjoys the benefits of the farcical charity.
“Non profits get most of their income from donations”.I disagree too if that was said. It really depends upon the non profit. There are non profits who sell goods and require fees as well as getting donations. The Red Cross charges for the blood donations they get freely from the donors. Non profits come in all shapes and sizes. @Rod is right. Some profit greatly from running these non profits. Over charging members of non profits is one reason why I consistently “bailed out” out of couple I was on the boards for. Miss management to acquire benefits in ways other then money is a tough thing to watch out for, let alone “tax”.
I am president of a non-profit organization. This organization is a small chamber orchestra and our mission is to present free concerts for underserved areas. Some years back, I submitted the paperwork for the 501-C3 non-profit designation.
This non profit status helps in two ways: 1) I am able to obtain government grants which help us give scholarship aid to college students who are needed in the string section of the orchestra and 2) individuals and businesses who contribute may deduct their contributions from their taxes.
I estimate the budget with expenditures and sources of income as best I can so that at the end of each fiscal year, we have very little left in our account. The monies we receive are needed not only for the scholarship aid for students, but for the rental of rehearsal space, renting or purchasing music, and the 1 million dollars worth of liability insurance we are required to carry.
I certainly don’t profit financially from the organization. In fact, I drive a minivan in order to carry musical instruments and players to rehearsals and performances. I would much prefer to drive a Mazda Miata, but one can’t fit 2 string basses, 1 cello, 1 violin and two French horns along with 6 musicians in a Miata. My contributions in writing the grants, furnishing transportation, performing with the group, and doing business details is my “in kind” contribution.
Non profits get most of their money from donations, period. It is true that the Red Cross sells blood that DONATED, but that only provides them with a small part of their income, and it started with a DONATION. Goodwill Industries also makes money from selling goods that were donated, but it all starts with the donation. I stand by this statement. I also consider government grants as donations.
A Not for profit is a lot closer to a For profit than it is to a Non profit. I have serious doubts about the credentials of the blogger dagosa linked to. He writes a lot of blogs. I have worked for a Not for Profit and it is not a non profit.
As for people profiting greatly from non profits, I’m shocked I tell you, shocked. Only 15% got to the recipients, I’m kinda surprised that that much got to them in many cases.
http://www.irs.gov/Charities-&-Non-Profits
Will you accept the IRS. notice they only define non profits.
Notice too that the legal definition is not nearly so strict.
It is what I said and referenced unless the free legal and the IRS are not to be believed too.
And no…nonprofits as defined by the IRS cannot all be categorized in one box by say they get their money from donations. How else do you categorize beach clubs, IAABO, road associations, Elks Club, Eagles club etc. which all must apply for non profit status from the IRS and charge fees for service and sell goods to their members to remain functional. . I don’t get where you are coming from. In the case of road associations, their fee is tied to their service and they can’t accept donations. Are you saying non profit registered hospitals DONOT charge for their services and get most of their operating costs paid by such charges ?
These thousands upon thousands of non profits are essential to a functioning society. And a big per cent of them function on fees for goods and service and has nothing to do with donations.
I know this may not be from an acceptable source, but it does explain how non forfeits can generate income from sales. The sales are taxed but the proceeds after the tax still fund the non profit. It’s really how a large number of them operate and not on donations or donations alone.
@keith
BTW, the road association I belong to is non profit. We can charge dues each year. If you don’t pay, our association can go to the town and have a lien placed on your property. I don’t call that a donation.
The largest corporation in a 5 county area here is the non profit hospital and charity is an insignificant portion of the company’s finances.
@asecular–Don’t feel sorry for me. The reward for my work is to bring people who have professions other than music together with talented college and high school musicians with the mission of bringing classical music to audiences who, in these hard financial times in our area of the Midwest, can’t afford concert tickets. This past season, a retired medical doctor who is also a fine pianist gave a wonderful performance of Mozart’s 21st piano concerto with the group. I also play in a community band. We are trying to revive the music program in a local high school. We provide the music for commencement. The program in this high school is just getting back on its feet–their band students are playing along with us. We also become the pep band for one basketball game a year. Our hope is that the high school band program gets to the point that it can take over these functions.
What do I get out of it? Well, at 71 it keeps me young. If I had a paying job, I would have to spend the salary on Geritol to try to stay young. Years ago, I used to be paid for some of the gigs that I played. What I do today is more satisfying. My profession wasn’t music–I retired as a math and computer science professor.
dagosa, thank you for the three links in your previous post, it shows one thing that I said, not-for profit is not an IRS definition. The links also show that their isn’t a clear definition for not-for profit because it is defined only in some states. To be honest, the not-for-profit that I described is really the definition for the state that the company I worked for was located in. It is similar to the definitions that other states who define not-for-profit, but I can’t say that all definitions are exactly the same.
I also said that non-profits get most of their income from donations, and I still stand by that. The operative word is most. The road association you mentioned are really taxing their members as it is really a form of government, but then all governments are non-profit aren’t they? I have even read somewhere that all taxes, or at least the income taxes are actually voluntary, but try that for a defense for not paying them. Didn’t work for Al Capone. I guess you volunteered to pay income taxes when you volunteered to earn money.
I also said that I considered government grants as a donation, even though there are certain non-profits that get grants that many taxpayers are fundamentally opposed to. But I suppose that for every dollar the feds spend, grants or otherwise, there are at least a few taxpayers somewhere that are opposed to it.
Rod, I am a little curious about that non-profit hospital. I know they used to exist and many hospitals are somehow linked to a charity (church), but I would be curious as to how they can be classified as a non-profit?
I used to work for a bio-medical company once. Every year we were offered and opportunity to have a standard blood test done for about $16. The company nurse took the blood and I guess this was an insider price with bulk discount or something, but now, when my doctor orders a blood test for my annual physical, I have to go to the hospital to get it done, and they charge the insurance company $3700, of which the insurance company pays a couple hundred.
There has been some inflation since the mid 90’s, and of course the labor for taking the blood has to be added, but $16 to over $300 (actual payment)? That is some markup.
Non profit hospitals are suffering from an “epidemic of public relations problems” Such a shame.
Non profit/not for profit… TAX FREE is the key ingredient.
Well the cost of healthcare could really generate a lot of controversy here. I hope that bill in California passes and other states follow.
I got to thinking, part of the post where I first said that non-profits get most of their income from donations may explain the high cost of hospital services. I had stated that many charities sell trinkets at very high prices so that the money could be considered a donation. I guess charging $3700 for a $16 service would qualify as a donation to a charity under that definition.
Now that makes me wonder, if I didn’t have enough medical bills to equal 7% of my income so that I could itemize them, could I deduct them as charitable donations instead? Oops, is that the IRS knocking at my door wanting to audit my returns?
Keith, your explanation makes sense.
Coops are cooperatives. They’re a group of business that work together for the benefit of all. Each coop member will maintain his/her own financials and operate as a separate business, paying the coop for the benefits provided. Typical benefits would be marketing, such as the “Brown eggs are local eggs, and local Eggs are Fresh” ad campaign, which was probably done by a coop. Coops can also share a retail facility, such as at a farmer’s market.
So, Asecular, educate us. If Keith’s definitions are wrong, what are the correct definitions?