Take Away Harvard’s Nonprofit Status | Hacker News Reader

Take Away Harvard’s Nonprofit Status

nymag.com

26 pointsboh9 comments

After reading the article, I guess I don't really have an opinion on the tax.. but is it really reasonable to tax endowments over $1B, if the school has $4.2B in operating expenses? Seems like they should be able to keep a larger buffer than 3 months.

If the problem is "hoarding," then why have a fixed amount at all. Why not 1 year of operating expenses? That would encourage all educational institutions to spend more every year on ongoing expenses (like research).

Agree in principle, but 1 year seems low. Isn't the purpose of an endowment primarily to generate ongoing income?

I think somewhere in the neighbor hood of 20 years worth of expenses would be more reasonable. (Assuming a conservative 5% return on investment, the endowment would not be taxed on capital required to generate 1 year of operating expenses in income each year.)

Alternatively, perhaps a tax could be levied only on any income to the endowment beyond 1 year's worth of operating expenses.

The author notes (a) ways Harvard could spend its money that might have more public benefit and (b) that other non-profits are more deserving of donations. Even if all true, that doesn't mean it should be stripped of its non-profit status. Perfect management to optimize public benefit isn't the standard for whether an organization gets non-profit status.

The more interesting argument is about what organizational traits our government should require in order to be blessed with special treatment.

Put more abstractly, "we should take money from successful nonprofit A even though A has done nothing improper because I disagree with A's goals and/or methods and think it's wrong that people continue to give A money."

That's ludicrous. The hubristic desire to control others is extreme progressivism's worst attribute.

This is a bad idea. Harvard, Yale, Princeton, and other well endowed schools spend more money per student than they receive from tuition. If they were for-profit institutions, they would be further incentivized to raise tuition.

I don't think there's much popular understanding how non-charitable an organization can be and still qualify as a non-profit.

Essentially, to be a non-profit all you need is have a purpose other than profits and use your income to further that purpose. The purpose made to increase the profits of businesses in a certain industry and you still qualify. There's nothing in the definition that say "you must be good, benevolent and not greedy", all you need is purpose.

See: http://en.wikipedia.org/wiki/Nonprofit_organization etc.

> I don't think there's much popular understanding how non-charitable an organization can be and still qualify as a non-profit.

OTOH, most people when they talk about "non-profit status" and, particularly, taking it away, are actually talking about "status as a 501(c)(3) non-profit charity to whom donations are tax deductible as well as the charity's own income being untaxed". Either because the equate "non-profit" with the more specific type of non-profit, or because they are talking about the specific non-profit status of a named institution that happens to be a 501(c)(3), so that referring to that particular institution's non-profit status (rather than non-profit status in general) is a reference to status as a 501(c)(3) specifically.

As Harvard University is a 501(c)(3), this clearly applies in this specific case. Context matters.

Thank you, but I don't think you actually explained why Harvard fails to be a 501(c)(3)?

Probably because I don't think it does fail.

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