Question

Winston recently became the treasurer of Homeless, Inc., a § 50I(c)(3) organization that feeds individuals who are in challenging circumstances. One of the entity's directors has proposed that Homeless purchase and operate a fast-food franchise, to raise additional revenue (a projected increase of 45%) for its charitable mission. Because the earnings generated by the fast-food franchise would be tax-exempt, substantial additional net revenues would be provided. How should Winston respond?

Answer 1

Response

Homeless inc is a tax exempt entity. Operating a fast food franchise will generate additional revenue for charitable purposes. However such additional revenue is unrelated to business and will be taxed as per corporate tax rates.