

Take Away Harvard’s Nonprofit Status - boh
http://nymag.com/daily/intelligencer/2014/09/take-away-harvards-nonprofit-status.html

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rgbrenner
After reading the article, I guess I don't really have an opinion on the tax..
but is it really reasonable to tax endowments over $1B, if the school has
$4.2B in operating expenses? Seems like they should be able to keep a larger
buffer than 3 months.

If the problem is "hoarding," then why have a fixed amount at all. Why not 1
year of operating expenses? That would encourage all educational institutions
to spend more every year on ongoing expenses (like research).

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0xffff2
Agree in principle, but 1 year seems low. Isn't the purpose of an endowment
primarily to generate ongoing income?

I think somewhere in the neighbor hood of 20 years worth of expenses would be
more reasonable. (Assuming a conservative 5% return on investment, the
endowment would not be taxed on capital required to generate 1 year of
operating expenses in income each year.)

Alternatively, perhaps a tax could be levied only on any income to the
endowment beyond 1 year's worth of operating expenses.

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alexdevkar
The author notes (a) ways Harvard could spend its money that might have more
public benefit and (b) that other non-profits are more deserving of donations.
Even if all true, that doesn't mean it should be stripped of its non-profit
status. Perfect management to optimize public benefit isn't the standard for
whether an organization gets non-profit status.

The more interesting argument is about what organizational traits our
government _should_ require in order to be blessed with special treatment.

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cjensen
Put more abstractly, "we should take money from successful nonprofit A even
though A has done nothing improper because I disagree with A's goals and/or
methods and think it's wrong that people continue to give A money."

That's ludicrous. The hubristic desire to control others is extreme
progressivism's worst attribute.

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logicalman
This is a bad idea. Harvard, Yale, Princeton, and other well endowed schools
spend more money per student than they receive from tuition. If they were for-
profit institutions, they would be further incentivized to raise tuition.

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joe_the_user
I don't think there's much popular understanding how non-charitable an
organization can be and still qualify as a non-profit.

Essentially, to be a non-profit all you need is have a purpose other than
profits and use your income to further that purpose. The purpose made to
increase the profits of businesses in a certain industry and you still
qualify. There's nothing in the definition that say "you must be good,
benevolent and not greedy", all you need is purpose.

See:
[http://en.wikipedia.org/wiki/Nonprofit_organization](http://en.wikipedia.org/wiki/Nonprofit_organization)
etc.

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dragonwriter
> I don't think there's much popular understanding how non-charitable an
> organization can be and still qualify as a non-profit.

OTOH, most people when they talk about "non-profit status" and, particularly,
taking it away, are actually talking about "status as a 501(c)(3) non-profit
charity to whom donations are tax deductible as well as the charity's own
income being untaxed". Either because the equate "non-profit" with the more
specific type of non-profit, or because they are talking about the specific
non-profit status of a named institution that happens to be a 501(c)(3), so
that referring to that particular institution's non-profit status (rather than
non-profit status in general) is a reference to status as a 501(c)(3)
specifically.

As Harvard University _is_ a 501(c)(3), this clearly applies in this specific
case. Context matters.

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omonra
Thank you, but I don't think you actually explained why Harvard fails to be a
501(c)(3)?

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dragonwriter
Probably because I don't think it does fail.

