Why Tax-Exempt Status to Nonprofit Profitable Firms

Last updated on November 20, 2021

That is a question that does not have an answer, till now. There are thousands of nonprofit firms with a tax-exempt status that are making billions of dollars and not paying a penny to the state. With a gaping tax deficit and talks of increasing taxes, the government is losing millions in taxes, thanks to profitable organizations with nonprofit tax-exempt status.

Part of the problem lies in how easy it is to obtain a tax-exempt status. You only need to state the reason for being a nonprofit, and it can be as simple as “to promote the security of life and property on the seas”. That is what ABS (American Bureau of Shipping) writes on the IRS tax filing form every year to continue with their tax-exempt status. They have an eight-story office building and give multimillion dollar packages to its executives, but they say they need the nonprofit tag to remain impartial.

Some have it even easier. According to the IRS, there are some kinds of groups such as trade unions, social welfare groups, agricultural organizations that do not even need to apply for a nonprofit status. Everybody knows that there are nonprofit that earn more than many profitable firms. Should they not be paying taxes?

Because the IRS is under-staffed, the laws are loose and there is no effort to tax such nonprofits, the trend is growing. While the ABS and many such profitable nonprofits are making millions and spending it lavishly, the country is trying to overcome a fiscal cliff to get its economy up and running.