
Newman's Own faces mammoth tax bill after lawmakers fail to spare the foundation - smacktoward
https://www.politico.com/story/2017/12/07/newmans-own-tax-bill-congress-212925
======
mikestew
“The problem is a 1969 tax law that bars foundations from owning more than a
small stake in private businesses.”

So this isn’t exactly news, and it certainly wasn’t news when Newman’s lawyers
wrote his will. As much as I want to sympathize and scream “those Republican
bastards!”, I kinda think this is a problem of Newman’s (be it the man, the
company, or the foundation) own doing.

~~~
rashkov
That may be so, but don't we want a company like newman's own to exist and do
good in the world? Maybe they shouldn't exist under the current tax regime,
but it's not the company that's in the wrong but rather the system that it
operates under.

~~~
adventured
Please explain, if you would, why you think a charity should be able to own
majority positions in for profit operating businesses and shield the profits
from that private business behind a charity-based tax approach.

That can enable, among other things, vast abuses by companies that set up
charities just to act as a front for private businesses to shield profits from
high tax brackets. The charity still has to distribute a certain modest
percentage of their assets per year, and that pales in comparison to paying
30% or more in taxes.

So you set up Burger Charity (or call it McDonald's Charity), which owns
BurgerStand USA (operating restaurants). BurgerStand generates profit and
kicks it back to Burger Charity almost entirely tax free. Burger Charity uses
the tax free proceeds to accumulate vast amounts of real estate, which it then
leases to BurgerStand (at an artificially cheap rate made possible by the low
tax structure, providing a competitive advantage) for restaurant locations.
Then they can do the same for equipment in the restaurants as well (Burger
Charity owns the equipment and leases it to BurgerStand at an artificially low
rate). Perhaps you set up Burger Equipment Corp that you own, and Burger Land
Holdings Corp that you own, they all work with BurgerStand USA (the profits of
which all kick back to Burger Charity mostly tax free). Cycle and repeat for
an astounding tax avoidance scheme that provides a blatantly unfair advantage
to an entity willing to abuse the charity approach.

~~~
StanislavPetrov
>That can enable, among other things..

You're entirely missing the point. The point is that our tax laws should be
written in a way to enable an entity like Newman's Own to operate without
enabling the many abuses you describe.

~~~
Shivetya
our tax laws should be written in the simplest form possible with the least
amount of exceptions so that people or corporations don't violate rules by
what at times appears to be random chance nor be so complicated that spending
millions looking for a specific set of rules is a viable pursuit.

personally outside of individual and religious groups I don't see why others
should be excused from taxation for being charitable. businesses get name
recognition for their activities and it should be part of being a good
corporate entity instead of a payoff

~~~
pc86
[removed]

~~~
smt88
So if a for-profit mercenary firm finds it most profitable to violate
international law, sell heroin, and torture civilians, you're saying that's a
good corporate entity?

Lunacy of Friedmanism aside, most corporations maximize value to shareholders
by being pro-social.

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RichardCA
This just means the issue needs to be addressed in a separate, "clean" bill
rather than being piggy-backed on top of the reconciliation process.

If things were normal in Congress, it would be a no-brainer.

~~~
kbutler
Have things ever been "normal" in Congress?

The practice of piggy-backing your little bill on other bills that are likely
to pass has been around a long time. Presidents have asked for a line-item
veto since at least Reagan, and it was even in the Confederate States
constitution.

But yes, there should be a general rule and practice that bills don't address
multiple unrelated topics.

~~~
tootie
Reagan's tax bill got 97 votes in the senate because he asked Democrats what
they would allow before he started. Congress didn't start to come apart until
Gingrich.

~~~
kbutler
Were you by chance a teenager during the Gingrich years? It seems a common
pattern to think the government goes off the rails as one begins to become
more aware of politics.

Dysfunctional congress goes back long before that.

1960s
[https://www.theatlantic.com/politics/archive/2015/01/50-year...](https://www.theatlantic.com/politics/archive/2015/01/50-years-
ago-americans-fired-their-dysfunctional-congress/384688/)

“The 88th Congress, before the [Kennedy] assassination, had sat longer than
any peacetime Congress in memory while accomplishing practically nothing. It
was feebly led, wedded to its own lethargy and impervious to criticism. It
could not even pass routine appropriations bills. It was a scandal of drift
and inefficiency.”

1856
[https://en.wikipedia.org/wiki/Caning_of_Charles_Sumner](https://en.wikipedia.org/wiki/Caning_of_Charles_Sumner)
was 'symbolic of the "breakdown of reasoned discourse" that led to the Civil
War.'

Congress has been broken for a long, long time.

~~~
tootie
Certainly the Civil War era was a lower low point, but we have actual data
that says Congress is getting worse and the Gingrich era represented a nadir
that we can't break out of.

Congress will never be as productive as people expect but also expectations
change. It really has gotten worse. To say it's always been broken belies the
enormous progress American society has made in the past 100 years. It
definitely can work and has worked extremely well on the balance. Just not
now.

[https://www.washingtonpost.com/news/the-
fix/wp/2014/04/10/pr...](https://www.washingtonpost.com/news/the-
fix/wp/2014/04/10/president-obama-said-the-113th-congress-is-the-least-
productive-ever-is-he-right/)

~~~
Dagwoodie
The country has never been more divided politically and I highly doubt that
had anything to do with Gingrich.

~~~
youdontknowtho
No, while the country is certainly more divided than ever, you can't say that
he played no part in it. His tactics were successful but they were
definitionally opposed to cooperation. Calling your opponents antiamerican or
unpatriotic or "demonic" to keep a fringe base frothing at the mouth worked
for him and later reps in the house who redistricted themselves into safe
districts. Now they are completely at the mercy of the extreme voters in those
custom districts.

~~~
kbutler
I'm not sure how saying your opponents are frothing at the mouth or calling
them a fringe base of extreme voters who hold their reps at their mercy is any
more cooperative.

The intent to marginalize the opposition and justify ignoring their concerns
remains the same.

~~~
youdontknowtho
sure. "they both do it equally." keep thinking that.

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shas3
The most famous case of foundations being sued for owning businesses is Howard
Hughes Medical Institute and Hughes Aircraft, which was then the largest
defense contractor in the US:
[https://en.wikipedia.org/wiki/Hughes_Aircraft_Company](https://en.wikipedia.org/wiki/Hughes_Aircraft_Company)

------
tomohawk
Regardless of the merit/demerits in this case, this is an aspect of tax law
that I've always found distasteful - the special little one-offs. Laws should
be general and apply equally to all.

The US Constitution forbids bills of attainder. These special loop holes for
individuals seem very much like bills of attainder.

~~~
dragonwriter
A bill of attainder is an act of a legislature declaring a particular person
guilty of a crime and prescribing criminal punishment; they aren't the same
thing as this, which is (in effect of not in name) a private bill, which are
well established as Constitutional.

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rconti
This is sort of ironic, because isn't this precisely what the president is
accused of doing? Sheltering money from taxes in a foundation? Or is it
accusations of laundering rather than tax sheltering? I guess I don't quite
get the difference, either.

Regardless, both cases show that it's pretty hard to actually get caught doing
it.

~~~
matt4077
The major problems with Trump's foundation was that (a) it involved a lot of
"self-dealing", where the foundation would pay for services/room rental etc at
Trump properties, (b) some money that was outright spent on items for Trump,
such as a portrait of him, (c) that he made specific promises regarding the
use of funds, but never actually paid much or anything to the announced
recipients, and (d) that he overstated the amount of money he had put up
himself.

(a) is not a crime by itself, but it raises red flags, and there usually needs
to be a really good paper record showing, for example, that other options
weren't available, and that only market prices were paid. (b) is basically
misappropriation or embezzlement, but depending on the amounts involved, it
can be considered a mistake and healed by paying it back. Not sure about (c)
and (d)'s legality.

There is absolutely nothing wrong with structure of, for example, the Bill and
Melinda Gates foundation, or Soros' Open Society Foundation. Yes, the
foundations are not subject to inheritance taxes. But the money is required to
be spent on altruistic endeavours. It cannot be clawed back for personal
expenses, not by the founders, nor by their descendants.

------
abtinf
How does this work with the Mozilla foundation owning a massive for profit
company?

~~~
dangrossman
"Mozilla Foundation" is not a private foundation, but a 501(c)(3) public
charity. That's the difference. Public charities are exempt from the private
foundation rules that prohibit excess business holdings.

------
bovermyer
OK, so while everyone else is arguing about whether Newman's Own should be
allowed to operate as it has or not, I'm curious about a different issue.

What's a parliamentarian, and why can they unilaterally change bills? Or am I
misunderstanding their role?

~~~
kale
The senate has the filibuster provision to give the minority party the ability
to slow down or block legislation. To overcome a filibuster, 3/5* of the
senate have to vote to end it.

At some point, the senate was afraid of gridlock, so there was a special
provision made for things that deal with money (not sure if tax only), where
things that have a minimal impact on the budget can overcome a filibuster with
a simple majority. The parliamentarian is the one who decides if a bill is
"minimal impact", which is set at $1.5T at the moment.

Therefore the parliamentarian has decided that changing the non-profit law
would cause this tax bill to be more than $1.5T in net change, meaning it can
be filibustered.

Edit: Wikipedia article [1]
[https://en.wikipedia.org/wiki/Parliamentarian_of_the_United_...](https://en.wikipedia.org/wiki/Parliamentarian_of_the_United_States_Senate)

[2] * corrected my math, thanks to dragonwriter

~~~
dragonwriter
> The senate has the filibuster provision to give the minority party the
> ability to slow down or block legislation.

In theory, that's not the purpose; the Senate has a tradition of unlimited
debate, to assure proposals are fully vetted before being decided, though,
yes, they clearly have that effect.

> To overcome a filibuster, 2/3 of the senate have to vote to end it.

No, to invoke cloture, 3/5 of the Senate have to vote to end debate [0], which
is why you hear about a 60 vote bloc being filibuster-proof.

[0]
[https://www.rules.senate.gov/public/index.cfm?p=RuleXXII](https://www.rules.senate.gov/public/index.cfm?p=RuleXXII)

------
bartart
It seems like it would be best for the foundation to sell Newman's and use the
proceeds to create an endowment. They could use investment gains from the
endowment over time to find their charitable mission, and it would also be
good because their assets wouldn't be so concentrated in the food business,
which is hyper competitive and pretty low margin.

~~~
onion2k
Would it be possible for the Newman's brand to continue profitably without the
charitable aspect of its messaging? Would customers remain loyal if, say,
Kraft bought it? If not then it's not going to sell for very much..

------
dillondoyle
If the problem is a fixed max % ownership rule, why not just create 3 or 4
separate holding companies so each has ownership below threshold - surely
there's a reason this isn't the simple solution?

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drtillberg
The tax is reported as two times income. To me, a 99% charge might be a tax,
but a 200% charge ought to be a Fifth Amendment taking.

------
calebm
They should just follow the Scientology path of suing the IRS like 24k times
and hiring PIs to follow around IRS workers :)

~~~
jstewartmobile
Humorously cut to the heart of the matter? Go to your room! And don't come out
until you're ready to admit that US laws _aren 't_ just lipstick on raw power.

------
winslow
Is it looked down upon with what Newman's Own does with the charity? They make
good products and it is neat that they donate profits (after tax) to charity.
Just curious how well it was utilized etc. Quick research shows that it helped
some pretty good causes at least on the surface. Does anyone know any more
about it?

~~~
cjcole
I have personal experience with "The Hole in the Wall Gang Camp" and have
nothing but positive things to say about it. I don't and can't know how
efficiently they use their money (I didn't notice any extravagance), but it is
an extraordinary experience for the children attending and they (as far as I
could see) uniformly love it.

[https://www.holeinthewallgang.org/](https://www.holeinthewallgang.org/)

    
    
      The Hole in the Wall Gang Camp is dedicated to providing “a different kind of healing” to seriously ill children and their families, free of charge.

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stuff4ben
NOOOO! I love their salad dressing!

~~~
danso
New man's mint Oreo cookies are sublime. I subscribe to Amazon to get a 6-pack
monthly shipment.

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mirimir
They can sell formulas and names, right?

So it'll only be the charity that's missing.

~~~
code_duck
I wonder what charities primarily benefit from Newman?

~~~
DoubleCribble
Here's one. (I'm sure Butch & Sundance would be proud.)
[https://www.holeinthewallgang.org/about/Founder-and-
History/](https://www.holeinthewallgang.org/about/Founder-and-History/)

There are undoubtedly others he created and/or the foundation continues to
support.

~~~
code_duck
What I'm speculating about specifically is whether there is any political
issues around the charities or causes that Newman's Own supports. There could
be more to the story than just an arbitrary rule enforcement.

~~~
cjcole
It's a plausible inference given the timing and Newman's politics while alive
[1], and maybe it does apply to the other charities (I don't know one way or
the other), but at least with respect to The Hole in the Wall Gang Camp (for
seriously ill children), in my personal experience, it is conspicuously
apolitical. So much so that I suspect that the staff is trained to that
effect.

[1]
[https://www.alternet.org/story/100666/paul_newman%27s_politi...](https://www.alternet.org/story/100666/paul_newman%27s_politics)

"Unrepentant liberal, Newman was dedicated to civil rights, women's rights,
gay rights, and was determined to elect opponents of war and militarism."

~~~
code_duck
Yes, the hole in the wall gang example is a political and appealing to any
politician. However, if they were to support say, unions…

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nerdponx
Can't Newman's Own reincorporate _itself_ as a charitable organization?

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youdontknowtho
So they knew that the law imposed this penalty and then didn't comply? I have
to admit, I support confiscatory taxes. We can't depend on wealthy people's
charity to operate society.

~~~
dnautics
What makes you say we're doing a good job of relying on government stewardship
to operate society?

Is a popularity contest the best way to select the person who has the last
call on charitable management? How's that going?

~~~
youdontknowtho
yeah, democracy is overrated.

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ggg9990
This is not a big deal. It will get saved with a special bill that will pass
99-0, Rand Paul will probably abstain.

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dvdhnt
Idiotic and laughable result - much like our tax code.

