Yorba, the IRS, and tax-exemption [LWN.net]

Yorba, the IRS, and tax-exemption

Posted Jul 10, 2014 4:23 UTC (Thu) by dlang (guest, #313)
Parent article: Yorba, the IRS, and tax-exemption

just because a foundation is tax exempt, that doesn't mean that money the foundation pays to individuals is tax exempt, it gets taxed as any other income does

and no, you can't just have the foundation pay all your bills, the IRS looks at that and counts it as income (to the point that if you have a company cell phone, they count the cost of that as income and you are supposed to pay taxes on it)

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Yorba, the IRS, and tax-exemption

Posted Jul 12, 2014 2:28 UTC (Sat) by giraffedata (guest, #1954) [Link]

I presume you're responding to the statement, "No doubt there are unscrupulous individuals out there who would love to be paid to write software but not have to pay taxes."

I don't know what kind of accounting scheme that statement contemplates, but a fundamental point to be made here is that 501(c)(3) does not to any substantial degree keep the organization from owing taxes. The organization wouldn't owe taxes even without the status, because it doesn't make a profit and income tax is based on profit.

And that's why the primary point of having 501(c)(3) status is not to avoid taxes. There is a slight tax advantage to not-for-profit status that has to do with making money in some tax years while losing money in others, but the main point of 501(c)(3) is the deductibility of donations by the donors.