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Why Do Nonprofits Have Taxable Subsidiaries?

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  • Yetman, Michelle H.
  • Yetman, Robert J.

Abstract

Nonprofit organizations operate taxable activities in two general ways: as unrelated businesses operated by the nonprofit or through controlled subsidiaries. Prior research and regulatory attention has focused on unrelated business activities, although taxable subsidiaries generate at least as much taxable revenue. We find that nonprofits place their taxable activities into subsidiaries when those taxable activities are relatively large, and when the taxable activities are relatively more risky. Nonprofits trade off possible benefits of the subsidiary form with the costs of reduced tax planning ability.

Suggested Citation

  • Yetman, Michelle H. & Yetman, Robert J., 2008. "Why Do Nonprofits Have Taxable Subsidiaries?," National Tax Journal, National Tax Association, vol. 61(4), pages 675-698, December.
  • Handle: RePEc:ntj:journl:v:61:y:2008:i:4:p:675-98
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    References listed on IDEAS

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    1. Darrel Cohen & Glenn Follette, 2000. "The automatic fiscal stabilizers: quietly doing their thing," Economic Policy Review, Federal Reserve Bank of New York, issue Apr, pages 35-67.
    2. Rebecca M. Blank, 2001. "What Causes Public Assistance Caseloads to Grow?," Journal of Human Resources, University of Wisconsin Press, vol. 36(1), pages 85-118.
    3. Byron F. Lutz, 2008. "The connection between house price appreciation and property tax revenues," Finance and Economics Discussion Series 2008-48, Board of Governors of the Federal Reserve System (U.S.).
    4. Lutz, Byron F., 2008. "The Connection Between House Price Appreciation and Property Tax Revenues," National Tax Journal, National Tax Association, pages 555-572.
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