Saturday, December 29, 2012
Bloomberg raised this question last month when it published an article titled Tax-Exempt Firm Gets $600 Million Profit Flying First Class. The firm at issue is the Code section 501(c)(6) American Bureau of Shipping, which inspects ships and sets maritime standards around the world. The cited profits are over a seven-year period (2004 to 2010), during which time the organization's chief executive officer also received compensation totalling $21.7 million. According to Bloomberg, the firm is not alone - the article also cited such well-known groups as the National Football League and the National Hockey League as well as more obscure but highly profitable organizations such as the U.S. Polo Association, which collects royalties on annual retail sales of $1 billion. It also contrasted the US tax treatment of such entities with that of European authorities, who tax the European affiliate of the American Bureau of Shipping. Yet nothing in the article indicates that these organizations are not in compliance with the existing provisions and requirements of section 501(c)(6). Which raises the question - is it time to revisit the rules for non-charitable, tax-exempt organizations?
Hat tip: EO Tax Journal.