Startup Legal Talks (10)
How American Nonprofits Can "Make Money"
In the last issue, we introduced the "profit model" of non-profit organizations, so in addition to open source, throttling is equally important. In this installment, we'll take a look at how nonprofits can save money.
1. Volunteer service
There is a point that is often overlooked, but it is actually a very important advantage of non-profit organizations, and that is volunteer service. Non-profit organizations can hire volunteers. Usually middle school students and college students have some requirements for volunteers, so they will go to non-profit organizations to participate in some work and get a volunteer certificate. Nonprofits are not required to pay them wages. Note that only non-profit organizations can hire volunteers. If it is a regular for-profit company, it is not allowed to hire volunteers. No matter who is hired by a for-profit company, even short-term interns must be paid according to the workload, otherwise it is illegal . So the fact that nonprofits can use volunteers is definitely a big money saver.
2. Not all non-profit organizations are exempt from tax, and a tax-exempt non-profit organization is not exempt from all taxes
This feels like a tongue twister. We divide it into two levels.
Not all nonprofits are exempt from tax
What does this mean, because like other types of companies, non-profit organizations are also registered at the state level. The United States does not have the concept of companies registered at the federal level, so non-profit organizations are a state law concept. The tax exemption, the full name is tax exemption, is to first obtain the tax exemption qualification from the US Internal Revenue Service of the United States, and then it is possible to obtain the tax exemption at the state level. In other words, it is possible that a non-profit organization is only registered at the level, and then it is not tax exempt until it obtains federal and state tax exemptions.
A tax-exempt nonprofit is not exempt from all taxes
What is this concept? Even if a nonprofit has successfully obtained federal and state tax exemption qualifications, it does not mean that the nonprofit is exempt from all taxes. So who is exempt from non-profit organizations?
In fact, the most important part of the tax exemption for non-profit organizations is the corporate income tax, which means that the money earned by non-profit organizations does not need to be subject to a 21% federal corporate income tax first.
In addition, most states give nonprofits property tax exemptions. We know that holding real estate in the United States requires paying very expensive real estate taxes every year. If nonprofits were to pay property taxes, it would be difficult for American universities and hospitals to have such a large footprint.
In addition, most other types of tax non-profit organizations are not exempt, such as:
If the salary is paid to the employee, the withholding and payment of the employee's personal income tax is not exempt.
In the United States, sales tax and use tax, that is, the part where the checkout price is a little higher than the price on the shelf when you buy something, are not given to non-profit organizations in most states. exempted. You can recall that buying a water bottle at a college souvenir store in the United States usually still has this sales tax.
Last but not least is business income that is not related to the purpose of the nonprofit. For example, a church will hold some religious-related activities on weekends and charge the public a certain fee. Churches are usually relatively empty Monday through Friday. However, if a church takes advantage of this business opportunity and leases the venue to some companies for commercial purposes from Monday to Friday, then this part of the income is not related to the non-profit purpose of the church and is taxable income. This is legally called UBI (unrelated business income).
The types of non-profit organizations
The tax-exempt status of non-profit organizations mentioned above is stipulated in several items such as 501(c) of the U.S. Tax Code. Among them, there are 29 categories under 501(c). Let me show you here.
Interested friends can save a screenshot. But in fact, you don't need to understand so many types. In fact, most of our common non-profit organizations that can be used in real life are 501(c)(3) organizations, including religious, educational, and charitable organizations. , science, literature, public safety testing, the promotion of amateur sports competition and the prevention of child or animal cruelty. It sounds very broad, which is why most of the nonprofits we hear about are of this type. The universities, hospitals, etc. we mentioned earlier are also 501(c)(3) non-profit organizations.
4. Comparison of non-profit organizations in China and the United States
Under Chinese law, non-profit organizations include foundations, private non-enterprises and associations. Among them, most of the non-profit organizations in China we have seen are private non-enterprises, which is what we often call "people's non-profits". As for this civilian, it is not bad now. When it used to be a dual management system, it was not only necessary to register with the civil affairs department, but also to recruit a unit according to its field. Double control of units. Although double control is now abolished, it is difficult to successfully register a non-profit organization in China and obtain tax-exempt status. Many non-profit organizations that are seriously working for the welfare of the general public have been unable to legally apply to become non-profit organizations in China after dozens of repeated defeats and repeated defeats.
Moreover, non-profit organizations in China have requirements for registered capital. According to different levels, the registered capital requirements are different. This also discourages many applicants.
The last point about Chinese non-profit organizations is that in China, non-profit organizations are more at the mercy of the government and are easy to become vassals of the government. Non-profit organizations are already limited in manpower and resources, and they have to deal with the government's task showdown, so the space for social welfare has been greatly compressed.
In contrast, in the United States, the establishment process of a non-profit organization is very simple, there is no requirement for registered capital, and there is no requirement to be affiliated with a government department. As long as you meet the conditions, you can get tax-exempt status. Happening. And no matter what nationality or status you are, you can apply for a non-profit organization in the United States.
Having said so much, everyone should have some concepts about non-profit organizations in the United States.
