Who profits at nonprofits
Non-profits make a lot of promises. Some promise to help the poor. They are not supposed to enrich their executives. They all face certain rules if they run businesses on the side. U.S. News and World Report's Penny Loeb and the Philadelphia Inquirer's Neill Borowski have spent a lot of time examining nonprofits. Here are some of their tips:
Check executive income. The Internal Revenue Code stipulates that nonprofit revenues should not be used to enrich executives. Yet, U.S. News and World Report found that the NFL paid Commissioner Paul Tagliabue $2.5 million in salary and gave him a $950,000 loan.
Look for disguised executive incomes. "You might be looking at one form for an administrator's salary, and it's, say, $90,000," Borowski said. "That's very low compared to the norm. Then, when you start to put together related organizations, you have to total up the salaries to give an overall umbrella salary."
Examine political contributions. U.S. News and World Report found that the National Education Association, the nation's largest union with 2.2 million members and a nonprofit, takes in $200 million a year and has made $8.9 million in political contributions.
Identify subsidiary companies. The Unrelated Business Income Tax act of 1950 requires nonprofits to pay taxes on income from subsidiary businesses unrelated to their tax-exempt mission. Loeb, Pound and Cohen reported that fewer than 5 percent of nonprofits reported unrelated business income. However, what is "unrelated" income is ill-defined.
"Most people think of nonprofits as primarily getting donations from the public, but they get most of their revenue from operations," Borowski said. "You have to step back and say, 'Which of these operations are like businesses and are competing with for-profit business?'"
When examining hospitals, confirm indigent care. Hospitals qualify for tax exemption based on such care. Yet, U.S. News and World Report found that six hospitals examined did not spend significant percentages of gross income on indigent care.
When examining educational institutions, also check out the Integrated Post-Secondary Education Data System (IPEDS), a database from the U.S. Department of Education on the nation's colleges. "It is a big database that comes out every year," Borowski said. "It is really rich in financial, enrollment and scholarship information."
Who profits at nonprofits
Non-profits make a lot of promises. Some promise to help the poor. They are not supposed to enrich their executives. They all face certain rules if they run businesses on the side. U.S. News and World Report's Penny Loeb and the Philadelphia Inquirer's Neill Borowski have spent a lot of time examining nonprofits. Here are some of their tips:
Check executive income. The Internal Revenue Code stipulates that nonprofit revenues should not be used to enrich executives. Yet, U.S. News and World Report found that the NFL paid Commissioner Paul Tagliabue $2.5 million in salary and gave him a $950,000 loan.
Look for disguised executive incomes. "You might be looking at one form for an administrator's salary, and it's, say, $90,000," Borowski said. "That's very low compared to the norm. Then, when you start to put together related organizations, you have to total up the salaries to give an overall umbrella salary."
Examine political contributions. U.S. News and World Report found that the National Education Association, the nation's largest union with 2.2 million members and a nonprofit, takes in $200 million a year and has made $8.9 million in political contributions.
Identify subsidiary companies. The Unrelated Business Income Tax act of 1950 requires nonprofits to pay taxes on income from subsidiary businesses unrelated to their tax-exempt mission. Loeb, Pound and Cohen reported that fewer than 5 percent of nonprofits reported unrelated business income. However, what is "unrelated" income is ill-defined.
"Most people think of nonprofits as primarily getting donations from the public, but they get most of their revenue from operations," Borowski said. "You have to step back and say, 'Which of these operations are like businesses and are competing with for-profit business?'"
When examining hospitals, confirm indigent care. Hospitals qualify for tax exemption based on such care. Yet, U.S. News and World Report found that six hospitals examined did not spend significant percentages of gross income on indigent care.
When examining educational institutions, also check out the Integrated Post-Secondary Education Data System (IPEDS), a database from the U.S. Department of Education on the nation's colleges. "It is a big database that comes out every year," Borowski said. "It is really rich in financial, enrollment and scholarship information."