Posted on 04/04/2006 2:17:28 PM PDT by Eaglewatcher
So where was I wrong ? Puchases made by a 'not-for-profit' organization are treated exactly the same as purchases made by a for-profit enterprise in the normal course of running its business.The not-for-profit is eligible for the exemptions in Sec. 102. To get them their purchases must be "for resale; to produce, provide, render, or sell taxable property or services; or in furtherance of other bona fide business purposes." Basically, a nonprofit doesn't have any "business purposes" so to not pay the FairTax, their purchases must be for resale or to produce taxable property or services.
"For nonprofit institutions, equals current expenditures (including consumption of fixed capital) of religious organizations, child day care services (excluding educational programs), social advocacy organizations, human rights organizations, civic and social organizations, residential mental health and substance abuse facilities, homes for the elderly, other residential care facilities, social assistance services, political organizations, museums, libraries, and grantmaking and giving services. The expenditures are net of receipts--such as those from meals, rooms, and entertainments--accounted for separately in consumer expenditures, and exclude relief payments within the United States and expenditures by grantmaking foundations for education and research. For proprietary and government institutions, equals receipts from users."The expenditures of nonprofit organizations is in the FairTax base and is assumed to be taxed by the AFT. One of the stated purposes of the FairTax bill is "to tax all consumption of goods and services in the United States once, without exception, but only once." Suppose a charity buys a can of soup and serves it to a homeless person (he consumes it), how is the consumption of that good (the soup) taxed if the charity doesn't pay the FairTax when they purchase the soup?
I don't understand why those purchases would be in the FairTax base. That just isn't the way I read these sections of HR25.
The language of HR25 seems to EQUATE the operations expenses of a not-for-profit organization with those expenses "(3) in furtherance of other bona fide business purposes" of a business. This is an exception to the "tax everything once" rule to placate those that would otherwise complain about taxing charitable organizations.
If giving to a charity was a non-taxable event, but the charity had to pay taxes on everything it spent those contribution on, the the charity would be losing compared to the current system. You know that isn't going to happen, and it isn't the way HR25 is written.
Nightmare, since under the FairTax anybody can give somebody else money and pay no FairTax, what would be the point of a Not-for-Profit Organization ? If the Not-for-Profit was treated just like any consumer, and had to pay the FairTax on purchases to run its operations, why would HR25 need any language at all with regards to Not-for-Profits ?
`SEC. 706. NOT-FOR-PROFIT ORGANIZATIONS.
(e) EXEMPTIONS- Taxable property and services purchased by a qualified not-for-profit organization shall be eligible for the exemptions provided in section 102.
`SEC. 102. INTERMEDIATE AND EXPORT SALES.
`(a) IN GENERAL- For purposes of this subtitle--
`(1) BUSINESS AND EXPORT PURPOSES- No tax shall be imposed under section 101 on any taxable property or service purchased for--
`(A) a business purpose in a trade or business, or
`(B) export from the United States for use or consumption outside the United States, if, the purchaser provided the seller with a registration certificate, and the seller was a wholesale seller.
`(2) INVESTMENT PURPOSE- No tax shall be imposed under section 101 on any taxable property or service purchased for an investment purpose and held exclusively for an investment purpose.
`(3) STATE GOVERNMENT FUNCTIONS- No tax shall be imposed under section 101 on State government functions that do not constitute the final consumption of property or services.
`(b) BUSINESS PURPOSES- For purposes of this section, the term `purchased for a business purpose in a trade or business' means purchased by a person engaged in a trade or business and used in that trade or business--
`(1) for resale,
`(2) to produce, provide, render, or sell taxable property or services, or
`(3) in furtherance of other bona fide business purposes. `(c) INVESTMENT PURPOSES- For purposes of this section, the term `purchased for an investment purpose' means property purchased exclusively for purposes of appreciation or the production of income but not entailing more than minor personal efforts.
Sorry about not previewing the original post. I added an italics flag late and forgot it would wipe out the auto-formatting.
My interpretation of HR25 seems to match the sources I've looked at. Check this quote from page 4 of a whitepaper about the effect of the FairTax on Charitable giving:
"• Charitable operations, of course, continue to be tax exempt, operating under a sales tax
exemption certificate as they do today with most states. No purchase made by an exempt
charity is taxed.
• When charities provide products or services to individuals for compensation, essentially
a retail transaction, that transaction is taxed. This is comparable to the current system
not allowing the deduction of that portion of a gift for which the donor received some
return compensation."
http://www.fairtax.org/pdfs/Religious_Donations.pdf#search='fairtax%20charitable'
This would be a pretty big thing to get wrong, and I doubt that has happened at the AFFT.
I think Laurence Vance was incorrect in his article you posted last December. Vance is no authority on the FairTax. Others have it correct:
From http://50reasons.blogspot.com/
"All contributions to Churches and other non-profit organizations are made tax-free. These organizations no longer will bear the expense of filing tax returns with the IRS and paying their half of Social Security and Medicare payments for employees. In order to purchase goods and services tax free they will just have to apply to the state sales tax authority for a qualification certificate as a bona fide not-for-profit organization operated exclusively for religious, charitable, scientific or educational purposes."
I'll e-mail Karen Walby (who probably put together the NIPA numbers you used) and ask her about the inclusion of not-for-profit expenditures as part of the FT base.
Neither, Looey.
I believe I have acknowledged all the errors I may have made. Can't say the same about you, though.
As for your #611, 612, and 613, Looey, those are themselves "spam". The posts you quote had a purpose related to the thread topic but you seem unaware of that.
Nightie first stubbed his toe on this not-for-profit thing in relation to churches and he still can't admit his error - nor will he.
He continues to insist they and other NFP organizations (he seems to make no distinction between the different types of NFP organizations which is itself an error as some ARE taxable) are stuck with tax under the FairTax.
That's not the way the bill reads and only the Looey-like misreading of it allows him to make that sort of off-base observation. Kellis91789 doesn't understand you've hoist yourself on your own petard (and that he's beating his head against the wall) and you will never admit your error - or even the slightest possibility of a different interpretation.
Nightie first stubbed his toe on this not-for-profit thing in relation to churches and he still can't admit his error - nor will he.You might recall that I convinced AG that nonprofits would pay the FairTax. He's not the easiest nut to crack.
If giving to a charity was a non-taxable event, but the charity had to pay taxes on everything it spent those contribution on, the the charity would be losing compared to the current system.Under the current system, the money most people give to nonprofits has already been tax. Under the FairTax, the money given to nonprofits hasn't been taxed...yet. People would just have to give more (easier to do now that they are getting their gross pay) to allow the nonprofit to afford the FairTax.
Although the majority of PEOPLE that give money to charities do so from after-tax income because they don't itemize deductions, I suspect the larger contributions ARE from untaxed income because the larger contributors do itemize.
If it isn't worth itemizing your deductions, your marginal tax rate is unlikely to be over 23%, even including SS/M. So this crowd is not going to be able to donate 30% more than they used to.
The itemizers are already donating untaxed dollars, so they see no benefit on the donation side.
If the charity then had to go and pay 30% more for all their operating expenses, there is no way they would come out ahead. Yet the FairTax is touted -- in whitepapers, FAQs, and even the presentation they gave to the Tax Reform Panel last year -- as BETTER for charities than the current system.
It just doesn't add up to your interpretation. I'd be likelier to believe you are misinterpreting the links to the NIPA data -- or even that Karen Walby made a mistake in including that consumption from the base. I posted a message to her last night and provided a link to your post here. Hopefully she'll respond.
I see that you did manage to convince AG.
But this conclusion directly contradicts the whitepaper from AFFT I quoted, and it contradicts the common understanding of everyone else I've talked with. It also begs the question of WHY HR25 needs any language with regard to NFP if they are treated just like any other individual consumer.
I'd much rather have Karen Walby's explanation of why her Consumption number includes those NFP expenditures.
Nonprofits of the charitable, religious, and a few other types will not have to pay the FairTax on things they purchase for "for business purposes" (and yes, that means churches buy things, in effect "for business purposes" in spite of the fact they are not a business in the normal sense). As I've told you frequently the business purpose of a church is helping people find God and bringing comfort and sustenance.
The explanation is:
Organizations that meet the above criteria are issued a “qualification certificate” upon application to the state sales tax administering authority (on a form prescribed by the Treasury Department). Tithes, dues, contributions, and similar payments to qualified not-for-profit organizations are not considered payments for taxable property or services subject to tax. Individuals make such payments or contributions to qualified not-for-profit organizations tax free. If churches or not-for-profit organizations provide taxable services at no charge (running a soup kitchen for the poor, for example) these services are not subject to tax. If they provide taxable property or services in connection with contributions, dues or other payments to the organization, then the provision of the taxable property or service is treated as a taxable purchase at the fair market value of the taxable property or services. Example: An organization sells tickets to a dinner to raise funds for the group and charges $100 per ticket which includes a $25 dinner and a $75 donation. The organization has to collect tax on the $25 dinner portion of the ticket. Also, the sale of Bibles by a church is taxable. The not-for-profit organization is responsible for collecting the tax and filing tax reports to the state sales tax administering authority. Taxable property and services purchased by a qualified not-for-profit organization “for business purposes” are not taxable. So, in other words, purchases for business purposes are not taxable and sales to consumers are taxable. However, the organization must present its qualification certificate to the seller when making a purchase in order for the sale to be tax exempt. This is a narrower definition of not-for-profit organization than under current law. For example, the National Football League is not viewed as not-for-profit under the sales tax but is under the income tax.""“Qualified not-for-profit organizations” receive favorable tax treatment under the FairTax. These are organizations that are organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary, or educational purposes; as a civic league or social welfare organization; as a labor, agricultural or horticultural organization; as a chamber of commerce, business league, or trade association; or as a fraternal beneficiary society, order, or association. No part of the net earnings of not-for-profit organizations can serve to the benefit of any private shareholder or individual.
Note also that there are also some sorts of "not for profit" entities (the NFL was cited in the quote but there are others) that do not qualify with churches, etc. You've had this stuff pointed out to you before, Nightie.
Giving soup to the homeless by a church is certainly NOT a taxable event since that is the comfort and sustenance that is one of the things churches do as their "for busieness purposes". It is not taxed when purchased by the church assuming they use their exemption (and why would they not?) and is not taxed when given away since it is not sold (not "consumed" under the meaning of the bill).
Your example does not hold water (or soup).
But this conclusion directly contradicts the whitepaper from AFFT I quoted, and it contradicts the common understanding of everyone else I've talked with.I doesn't necessarily contradict the white paper. It depends on the definition of "business purposes." The AFT is the master of lies by omission.
Yet the FairTax is touted -- in whitepapers, FAQs, and even the presentation they gave to the Tax Reform Panel last year -- as BETTER for charities than the current system.Has the AFT ever said anyone would be worse off under the FairTax (except drug dealers and illegal immigrants). They don't exist to give people the truth about the FairTax, for better or worse - they exist to get the FairTax passed, by any means necessary.
Giving soup to the homeless by a church is certainly NOT a taxable eventI didn't say it was, did I?
the comfort and sustenance that is one of the things churches do as their "for busieness purposes".That may be true. If it is it means that the FairTax doesn't tax all consumption. It also means they need to that amount out of the FairTax base used for calculating the rate.
From #631:
"If churches or not-for-profit organizations provide taxable services at no charge (running a soup kitchen for the poor, for example) these services are not subject to tax. "
and:
"Taxable property and services purchased by a qualified not-for-profit organization “for business purposes” are not taxable. So, in other words, purchases for business purposes are not taxable and sales to consumers are taxable. However, the organization must present its qualification certificate to the seller when making a purchase in order for the sale to be tax exempt. "
The enquoting of "for business purposes" means that the meaning is broadly intended as something more that just the literal words. And the "business" of a church for example has been pointed out to you previously as bringing people to God and offering care and sustenance.
In fact, the FairTax will help most taxpayers - and you know it but won't admit it. You still continue to shill for the Status Quo (and you even deny that to demonstrate your intellectual honesty). And YOU exist to try o defeat the FairTax by any means necessary. You've put out FAR more in the way of misinformation than the FairTax organization ever has.
I'd say that the following little pretense of yours is an attempt to make readers believe that the soup giving was taxable - and now you pretend otherwise. That's trashy, Nightie:
"Suppose a charity buys a can of soup and serves it to a homeless person (he consumes it), how is the consumption of that good (the soup) taxed if the charity doesn't pay the FairTax when they purchase the soup? "
And it is YOU who assume that such is IN the FairTax base. I doubt that it is; perhaps you need to do a bit more research since you merely assume things not in evidence.
Oh, and BTW Nightie, giving soup away by the qualified NFP organization does not qualify as consumption since it is not a taxable event - it is a gift by that organization, not a sale to a consumer. It's what they're "in business" for, you see.
The enquoting of "for business purposes" means that the meaning is broadly intended as something more that just the literal words.WOW! Those are some powerful quotemarks to mean all that!! Actually, I think the quotemarks are to signify that the words enclosed are a quote (from the bill).
You've put out FAR more in the way of misinformation than the FairTax organization ever has.This is the point in are show where I ask you to give an example of "misinformation" I've put out and you are unable to provide it.
And it is YOU who assume that such is IN the FairTax base. I doubt that it is; perhaps you need to do a bit more research since you merely assume things not in evidence.I gave you conclusive evidence, you just refuse to believe it.
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