Viewing a single comment thread. View all comments

drxdrg08 t1_j9fgbet wrote

> Pennsylvania requires charities to be "institutions of purely public charity" to qualify for exemption. HUP test, which has 5 criteria ...... 5. Operates entirely free from private profit motive.

What is the definition of private profit motive?

> "The “eye popping” compensation paid to executives at four hospitals owned by Tower Health LLC disqualifies the nonprofits from charitable tax-exempt status, a Pennsylvania appeals court ruled in four related cases.

So highly compensated employees is the bar? Then let's remove non-profit status from all universities and colleges then.

Every single non-profit of note requires highly talented professionals to run it. Everyone knows how difficult it is for non profits to hire competent people as it is. So let's attack that aspect of non profits even more?

−1

UnionThug456 t1_j9i178y wrote

It's more complicated than that. You left out the part where it says that 40% of the CEO's salary is tied to profits. That gives away what they're trying to hide here: that the main goal is to make profits. You know, the thing that a non-profit is not meant to prioritize. They didn't peg executive compensation to the quality of care received by patients but to profit and that tells you everything you need to know.

If they're going to priotize profits, they're free to do so. They just have to pay tax on that profit like every other for-profit business out there.

2

ktxhopem3276 t1_j9flqji wrote

You hit the nail on the head. “Purely public charity” is vague and up to the courts to interpret without clarification from the legislature. My interpretation is they don’t give any profit for shareholders. However people really hate highly paid executives and conflate that with profit distributed to shareholders. One of the judges even said he stretched the truth to get the case appealed bc he has no idea how to interpret the vague law.

1

drxdrg08 t1_j9g4b8k wrote

> 5. Operates entirely free from private profit motive

This criteria is impossible to achieve.

Every single employee that is working at a non-profit and draws a salary (it doesn't have to be a high salary) has a presumed profit motive.

They want their employers to remain solvent, which would mean they continue to receive a paycheck, and/or they want their employer to grow so they can be better compensated or giving them a chance to move up in the hierarchy.

0

ktxhopem3276 t1_j9gcum9 wrote

Money changing hands isn’t always classified as a profit motivation which is receiving money as a result of prior capital contribution to the entity.
The definition of profit doesn’t include an employees salary even though there is a link between them. It gets a little tricky with executive bonuses and how much influence they have at deciding their own compensation but these large non profits have a lot of lawyers to figure that out

3