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Originally Posted by PersonOfInterest
Here is the IRS definition of a nonprofit -
Organizations organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary, educational, or other specified purposes and that meet certain other requirements are tax exempt under Internal Revenue Code Section 501(c)(3)
Your statement that " its sole purpose is to provide entertainment to villagers through extravagant ticket prices at the Sharon and the Studio theaters" needs to be qualified by looking at the organization's purpose statement in their incorporation records which should fit into the definition above.
In other terms, the money they make above their expenses has to be used for a purpose as indicated above. For example all of the 'profit' earned by the organization might go to further the education of performing arts. Were they a 'for profit' organization those profits would be given to the individual shareholders, owners or investors for their personal use.
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The above is good information. The key with non-profits is their stated purpose as defined in their articles of incorporation. Most non-profits are totally legitimate, and their actual operations are consistent with their articles of incorporation, which allow them nonprofit status. Unfortunately, there are illegitimate non-profits that hire fancy lawyers who can manipulate the laws/tax codes to form non-profits based on a stated purpose within their articles of incorporation which are a front and not consistent with the true operations/intentions of the organization. The motivation for doing this is not just to get tax exempt status, but can be for other perks granted to nonprofits such as exemptions to zoning requirements not afforded to other parties. I have personal experience with one such illegitimate non profit, that’s purpose is stated as religious in their articles of incorporation. The entity is only religious as a front, but because of their non profit status they are exempt from zoning and can run a for profit business in a residential location on land that is zoned as single family residential use only. They run their business behind locked gates, and when regulators make a visit it has to be by appointment. When the regulators show up, out come the Bible’s and on goes the religious dog and pony show. The neighborhood surrounding them is fully aware of what they do on a daily basis because they live there and are first hand witnesses. It is abundantly clear that the religious thing is a front, or shell game they play to gain a favorable status not afforded regular businesses.
It’s an absolute shame that this happens as it casts doubt on the legitimacy of the many great and well intended non profits out there. But the moral of the story is that not all non profits are created equal, so do your research and carefully select the ones to support. Lastly, I have no idea about the specific entity being discussed in this thread, it very well might be one of the good ones.