donovan wrote:This is one of the myths of a tax-exempt or non profit business. It is absolutely not ta fact they do business to just "cover costs to break even." It only means they do not distribute the profits to stockholders private individuals. Some of the most profitable companies in this country or non-profit.
No, it's not "absolutely not a fact".
I've worked directly for a 501 (C)(3) for 18 years - a performing arts center that operates as a direct support organization of a college. It operates through funding and grants. If it makes money, the funding and grants are reduced so that the profits, minus the funding basically equal the funding. In other words, it's a zero-sum game. Either it operates on the tax dollars, or it operates on self-generating revenue.
Making money only reduces the stress of "begging" for grants and "arts funding" dollars. That money has to be reinvested in the center to maintain tax-exempt status. Staffing is bare-boned and payroll is regulated as part of the over-all allowable expenditures in accordance with the 501 (c)(3) charter.
In the realm of an athletic program at a university, funds for facility improvements such as stadiums, weight rooms, etc., are raised through charitable foundations that are 501 (c)(3)'s, thereby allowing contributors to give larger amounts (sometimes up to 30% of their gross income), as tax-deductible donations which, in turn, encourages more donations.
But I digress. The point of my original post was that most athletic programs do not make money - therefore there are no profits to tax. They are usually spending more than they make just to keep facilities up to par and keep their various programs in operation. If profits were to be taxed, they would only be giving the money back in the form of grants. Further, if there actually were profits that exceeded the threshhold of their charter as a 501 (c)(3), they would lose tax-exempt status and be taxed, and possibly fined, accordingly.
Virginia Tech's recent stadium expansions and other facility improvements were self-funded in the manner that they raised the money through specific fund-raising initiatives, seeking corporate and private donations. I believe the money they "make" from athletics, if any, is apportioned to the non-revenue sports for improvements and operations. In the last several years, Virginia Tech has upgraded all of its athletic facilities - from the golf course to the Tennis complex - to a new softball stadium and a new soccer stadium.