If you and I both start a business, but you set yours up so all the producer surplus goes to yourself as the sole shareholder, and I set mine up so all the producer surplus goes to myself as the main employee, why should I be able to claim non-profit status?
If your non profit suddenly makes $10 million, you couldn't just pay yourself that money, could you? Surely you have to be able to justify that your spending was aligned with the stated goals of the non profit, if and when audited?
Forgive my ignorance, I'm from New Zealand, and the laws are quite different over here. For instance, corporate income tax is franked, so you aren't double taxed on profits. That alone removes a lot of incentive to eliminate the tax a company pays.
Sure, there's protections that apply after the fact of abuse, but the whole purpose of having a 501(c)(3) application and review is to try to filter inappropriate entities out before the fact.
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If you and I both start a business, but you set yours up so all the producer surplus goes to yourself as the sole shareholder, and I set mine up so all the producer surplus goes to myself as the main employee, why should I be able to claim non-profit status?
Are there not other protections against that?
If your non profit suddenly makes $10 million, you couldn't just pay yourself that money, could you? Surely you have to be able to justify that your spending was aligned with the stated goals of the non profit, if and when audited?
Forgive my ignorance, I'm from New Zealand, and the laws are quite different over here. For instance, corporate income tax is franked, so you aren't double taxed on profits. That alone removes a lot of incentive to eliminate the tax a company pays.
Sure, there's protections that apply after the fact of abuse, but the whole purpose of having a 501(c)(3) application and review is to try to filter inappropriate entities out before the fact.