Results tagged “tax” from Uncivil Society
In this video, Southwest shows employees receiving unexpected $10K bonuses. The promo promotes the image of a caring corporation, something that can be a powerful draw both for employee retention and consumer purchases.
One other thing that catches my eye--the added blurb that Southwest cares so much that it paid the employees' taxes on the bonus. Which is cool and all, but the tax paid theoretically counts as income to the employee, which in turn is taxed. So let's assume Southwest paid that tax--this, in turn, would be taxable income, which in turn . . . .
I was looking through legal materials last night and noticed something that had been there all along but had not previously caught my attention:
DC Comics, Inc. does not exist. In fact, it died the same year as Superman.
Really. As noted in court filings in the Superman case, in the early 1990s DC Comics, Inc. was dissolved and converted into a general partnership co-owned by two Time Warner subsidiaries (see this court order, p.4, #20) . The Superman court documents state that this happened back in 1993, but contemporaneous SEC filings state that the restructuring actually took place back in 1992:
TWE and WBI each owns a 50% interest in DC Comics, a New York general partnership, formed effective June 30, 1992 to continue the business previously conducted by DC Comics Inc., a New York corporation.
A search of the New York Corporations registry confirms that the name "DC Comics, Inc." is no longer active.
I'm a bit time constricted right now, so I'll have to leave out much of the legal analysis I'd provide were I writing this on Blog@, to which I plan to return soon once I finish my current writing project. For all I know, this may have been a major topic of discussion back in 1992, a period of time when I was temporarily out of the loop in all things comics--when I have a bit more time, I'll do a bit more digging.
Meanwhile, a few quick notes:
*DC Comics still exists, just as a general partnership. That partnership is the entity that co-owns Superman and assigned the rights within Time Warner.
*Unlike a corporation, a partnership does not pay corporate tax. It is what is called in the biz a "flow-thru" entity. This tax status may have been at least partially a reason for the switch, though the enhanced organizational integration of DC's intellectual properties with Warner entertainment entities also may have been a factor.
*One trait a general partnership does not have is limited liability. What particularly struck me in regard to this is that Time Warner did not restructure EC Publications, Inc., which publishes Mad Magazine and could be more of a lightning rod for lawsuits.
*For reasons I *really* won't go into now re the history of corporate taxation, if the transaction had been being structured today I wonder if Time Warner would have set up DC Comics as a Limited Liability Company instead of a general partnership.
*Again, this is all off-the-cuff reflection, lacking the more intensive research & review I'd do for a post elsewhere. If anyone knows more re this, feel free to drop me a line.
Jack Siegel & Gene Takagi take a look at a controversial recent private letter ruling in which the IRS revoked a charity's tax exempt status. Note that PLRs, while instructive, are not binding precedent:
The IRS determined that the organization failed on all three parts. The IRS concluded that the grants did not qualify as being in furtherance of one or more exempt activities because the distributions were given to “other unrelated organizations to use in conducting their own program of exempt activities.†[This conclusion makes little sense to me. Grantmaking does not qualify as being in furtherance of an exempt purpose? - Ed.] Administrative costs played a large factor in the second and third parts of the test because the grantmaking activities only attributed for 13% of total expenditures over a four-year look-back period while salaries counted for 37% and general overhead at 50%.
Another charity-studded week for comics, which, like fashion, has become a significant presence in do-gooder fundraising. Via the Beat, news of two worlds colliding in last night's superhero fashion event at this year's Chocolate Show.
Trade shows fascinate me, because in the nonprofit & tax-exempt world they illustrate how identity design can lead us to see business as something distinct from business. The effect becomes even more interesting when you compare nonprofit trade shows to their for-profit counterparts. The Chocolate Show is run by a for-profit PR firm, but are the exhibitors there any more businesslike than drug vendors at an AMA convention, the publishers & resellers at the San Diego Comic Con or the industry promotion at the Oscars?
And then there's my favorite tax-exempt activity--the freak shows, rigged games and rides at agricultural fairs. You may think they're an ordinary profit-making enterprise, but as we tax-savvy do-gooders know, they're one of us!
Your tax dollars at work--it's published by the Library of Congress.
Below: the centerfold, which I guess would by NSFW were you to touch it. More at Banterist.
Comic-Con International is a marketing extravaganza for comics and movies, but it's also a recognized tax-exempt charity under Section 501(c)(3) of the tax code. Some observers--including nonprofit watchdogs--have suggested that the commercial hype is inconsistent with its charitable status.
Blog@Newsarama posts my analysis of this issue.
That's a quote from Shubert theater chair Gerald Schoenfeld, and it's key to Bloomberg's Jeremy Girard take on the capitalist vs. nonprofit conflict latent in this year's Tony Awards:
This year more than ever before, the nominations, announced May 13, favor narrow-focus, small-scale shows over high-volume Broadway glitz. The awards -- which will be broadcast by CBS on Sunday evening, June 15 -- pit private investors who have staked $15 million or more for a new musical or $2 million or more for a new play against publicly subsidized companies that don't pay taxes, get major breaks in union costs and have flop insurance in the form of thousands of discounted, presold seats.
I'm immersed in other things for a couple days, so for now I'll just recommend that you read the whole thing, which builds to an impassioned argument for expanding the Awards--also, by the way, a nonprofit enterprise--to include off-Broadway shows.
(On a related front--again, alas, time constrained--I haven't checked out the Tony Awards licensing arrangements, but the Oscars have, IIRC, historically yielded the Academy over 50 million a year tax free. More on that eventually, promise.)
On The Beat, Heidi MacDonald points us to the latest on the effort to raise money for comics legend Gene Colan.* The issue she notes--the lack of royalties for creators throughout much of comics history--is an important one to highlight, as the radically different market conditions can be hard for folks growing up today to comprehend.
Another thing I find myself explaining to disbelieving students every year: that the tax system doesn't allow you to take a deduction for donations made to individuals, however well-deserving. However, folks who want to help out beyond the Colan fundraiser AND get a tax deduction are in luck--they can make tax-deductible contributions to the 501(c)(3) Hero Initiative. The Initiative also makes much-needed revenue from selling signed comics, but remember: you can't take a deduction for the price of things you buy unless the charity documents that you've paid more than market value.
*Heidi's featured Colan cover was one of my favorites when I was collecting comics as a little tyke--for a while I bought literally every copy I found. Besides the picture, never underestimate the power of "SPECIAL ONCE-IN-A-LIFETIME ISSUE!!" on a nine-year old.
I agree; this is a most telling response:
Harvard is an investment bank with a mom-and-pop non-profit enterprise attached to it for tax purposes.
The Tax Domme specializes in tax advice for the adult entertainment industry:
To be an adult entertainer in the United States of America more often than not means leading a double life. To the outside world, the entertainer is a student, a wife, a mother, a daughter, a sister, best friend, coworker in a mainstream job and even fellow church congregant. When performing within their Adult profession they may be an exotic dancer, escort, phone sex operator, dominatrix, submissive, porn actress, smut writer or any combination of these. The reason for secrecy stems from the fact that there has been created a separate set of social rules for those that demand the product, sex, and those that supply it.
However, many consumers of sex, hold the entertainers to a separate set of social standards than themselves.
Her business seeks to help women rise above the economic difficulties of working in a taboo business. Besides running her tax "Dungeon," she also serves as a Financial Madam, managing investments. Arguably NSFW pics and tax advice here.
Whenever I hear about the revolutionary innovation of social entrepreneurship, one of the first things that always comes to mind is the Oscars. Jump over to Guidestar sometime and you'll see why. The Academy is a nonprofit trade association exempt from taxation under 501(c)(6), and, as is common, it has a related 501(c)(3). Each year the Academy makes 50 mil+ tax free from licensing the broadcast rights to Oscars, more than enough to fund the Academy's promotion of the movie industry and the charity's own work.
Which isn't to say that social enterprise isn't significant--just that folks haven't figured out why.
Tactical Philanthropy links to this fascinating news article from the UK:
Richer taxpayers should pay a surcharge of 10 per cent on earnings or investment income above £150,000 a year if they do not give the same sum to charity, Frank Field, Labour's former welfare reform minister, said yesterday.
The aim was "to encourage richer taxpayers to embrace the responsibilities of wealth" in a new philanthropy reminiscent of the Edwardian era.
Of course, one thing about the Edwardian era is that the government wasn't funding public health, poverty relief and pension programs at anything near the level or scope of what we see today.
The evolution of charitable rhetoric on this score deserves a whole book of its own--the government justified created its own social support networks because individual charities were ostensibly unable to engage in widescale systemic relief, but now that the government has been doing this for a while the dramatically higher tax rates needed to fund these programs are no longer associated with the charitable semantic domain. Instead, government funded has shifted into the domain of necessity, and so a person's tax payments no longer count as a sufficient contribution to the common good. Yet a mandatory payment to a non-governmental charity remains charitable, a value set that itself includes personal freedom.
This New York Times article on an Upper West Side children's store illustrates the transformation of profit-making commerce into nonprofit identity.
The store, A Time for Children, on Amsterdam Avenue near 84th Street, is owned by a family foundation that Ms. Stern and her husband, Michael Stern, established two decades ago to help disadvantaged children.
She opened the store, she said, as an enhanced way for their foundation to support theChildren’s Aid Society in New York City. With the store, she said, the couple’s foundation, Big Wood, provides not only money for Children’s Aid, but also a job-training site for its youth employment program.
All of the store’s after-tax revenue goes to Children’s Aid, and all of its employees, except for two managers and a training assistant, are 16- to 20-year-olds referred for part-time work by the agency. They generally work four-month stints of 12 to 15 hours a week, earning $8 an hour, while attending high school in most cases, or college in a few.
Jack Siegel breaks down the latest warning shot to charitable social entrepreneurs: Solution Plus v. Commissioner, Tax Court Memorandum 2008-12. I'll skip the procedural folderol and get right to the point: in this case, the court upholds the IRS' decision to deny 501(c)(3) status to an educational credit counseling service. Here are a few highlights:
Petitioner's articles of incorporation do not limit its activities to those related to education because the articles empower petitioner to engage in activities that are not purely charitable or educational. For example, petitioner could operate an investment business and offer products and services with respect to a customer's individual needs. Those activities stand in stark contrast to educational purposes acceptable under section 501(c)(3) . . . .
The term "charitable" is used in section 501(c)(3) in its generally accepted sense and includes relief of the poor and distressed or of the underprivileged. However, primarily providing services for a fee ordinarily does not further charitable purposes.
Yes, I know that there are any number of social enterprises that have avoided the fate of Solution Plus--which I guess after this will dissolve (ba dum bump!)--but cases such as this are a vivid reminder that exemption is not guaranteed. The world of social enterprise is not the world of the tax code; if you want to survive you must adapt.
- Smuggling and tax fraud on the academic museum circuit.
- Pending "reform" would double colleges' reporting burden
- Alumni credit cards offer rewards to stem decline in use
As for the last one, you might be wondering why that matters. Besides the ethical question raised by encouraging alumni to incur credit card debt, there's an interesting legal issue. A few years ago universities warded off IRS attempts to tax university affinity cards as UBIT by successfully arguing that the revenue was passive royalty income. The universities weren't performing any services such as marketing the cards; they were merely licensing the university's trademarks. Now that the UBIT issue seems dead, looks like some universities have forgotten why they aren't paying taxes on their affinity card income.
Danger, Will Robinson, danger!
A prophetic moment by way of the Kenneth Copeland TV ministry.
Another excellent question I've received: If a person donates property to a charity, how much can they deduct? The scenario that sparked the ask: an artist donating her art to a church for it to sell. She can deduct the price the art sells for, right?
Wrong!
Artists can only deduct the cost of the items used to create art of their own that they've donated--and if they deducted those items as a business expense, they can't deduct 'em again as a charitable deduction! The same thing goes for donations of personal papers. You also can't deduct the value of your time--for example, I could not deduct the value of free legal consultation to a charity, nor could a carpenter deduct the value of time spent helping to build a house with Habitat for Humanity.
But what about gifts of property more generally? Let's say the church member donated someone else's painting or some jewelry or stock?
Charitable business has been in the news quite a bit, and once again the fact that charities don't pay taxes on much of that business is attracting a fair bit of negative attention, especially from commercial competitors. We can expect the complaints to grow louder as the economy gets worse.
I've been asked to provide a brief overview of UBIT. Since it was just my dumb luck to get sick I've decided to set aside the podcast format for a day or two and set the answer out in writing.
Click below for more:
