Bigger question, Why are foundations tax exempt?
“Why are foundations tax exempt?”
Simple. Tax-exempt foundations enable billionaires to “donate” highly appreciated shares of stock with three extraordinary primary benefits. First, they never have to pay capital gains tax. Second, they obtain a deduction against ordinary income at the full market price of the “donation”. Third, they retain effective control of their foundation including not only the distribution of funds but, also, the investments made by the foundation. There are also several secondary benefits. Obviously, their “donations” are great for public relations, not unlike how a mafia boss would distribute turkeys for Thanksgiving. Billionaires can reward sycophants and relatives with bogus jobs at their foundations. And, of course, they can deploy the foundation’s funding decisions to advance their own political and business interests.