Newman’s Own and An Australian Tax Exempt Feeder: More on UBIT
The Philanthropic Enterprise Act of 2018 made it possible for the Newman’s Own Foundation to own 100% of Newman’s Own without triggering the excess business holding tax. Newman’s Own is marking the occasion with a TedTalk discussing IRC 4943(g) and encouraging other business to join the “100% for Purpose Club.” From the Associated Press last week:
To celebrate what would have been company founder Paul Newman ’s 100th birthday on Jan. 26, the Newman’s Own Foundation is inviting others to join them in that commitment, as part of the 100% for Purpose Club. In a TED talk released Thursday, Alex Amouyel, the foundation’s CEO and president, made the case for why more for-profit companies should donate all of their profits to social causes. She also pledged that the foundation will provide guidance and advice to organizations that want to make the switch. “It is trying to be a proof point and trying to serve as a model for a completely different type of organization,” Amouyel told The Associated Press in an interview.
The 11-minute TedTalk identifies only two other 100% for Purpose corporations: Humanitix, an Australian tax-exempt “marketplace facilitator” and Patagonia, a California public benefit that distributes all of its profits through a unique charitable trust structure. The most interesting thing is that Humanitix is a feeder in Australia, operating a ticket platform just like Ticketmaster. Except Humanitx is tax exempt in Australia because Australia has no unrelated business income tax and feeders — organization’s the profits from which are used solely for charity — qualify for tax exemption. In the United States, feeders are taxable. Humanitix USA Limited essentially does the same thing as its Australian parent but by adding an effort to provide access for the disabled, it achieves tax exempt status. From its 990″
Humanitix USA Limited maintains an event access platform (the Platform) for live events. It improves accessibility for people with disabilities to attend events, helping solve the problem of social inclusion and community participation. The fees generated by for-profit event organizers using the platform help fund education programs for disadvantaged children. Nonprofit organizations use the platform for their events but pay much lower fees which ae used to sustainably cover the operating costs of Humanitix providing the Service.
I’m not here to drop the dime on anybody, but Humanitix USA sounds like a feeder and a whole lotta private benefit. Here is more from the 990:
We have continued to grow and expand our market in the US while growing our US team through hiring. In FY 2023, we donated $475,000 to tackling humanity’s biggest challenges. From education, to health and beyond, our charity partners help us maximize the impact of every dollar we generate. Our donation to Chenla Children’s Healthcare provides compassionate international standard medical care to children suffering from infectious disease, febrile illness, premature birth, and a broad range of other pediatric diseases in Cambodia. Our donation to Abaarso Network supports world class educational institutions that provide high potential students with critical access, support, and leadership development in Somaliland Africa. Our donation to Couburwas International Youth Organization to transform Africa (CIYOTA) by providing access to quality education for conflict affected children in Ugandan refugee camps. Our long-term goal is to expand our platform access to enabling our disabled community to fully participate in all event experiences and offerings. Not only will this increase our profits for charitable donations, but it will further build a compassionate and inclusive community.
Humanitix USA and Humanitix Australia have exactly the same webpages, as far as I can tell. Except that the former talks a little about making its platform accessible to people with disabilities. Look. There is a lot of charitable funding going on from both locations and Humanitix should be commended.
I don’t assert that Humanitix is doing anything wrong or nefarious. Quite the opposite. That Humanitix USA is probably just a disguised feeder is more further indictment of our unrelated business income tax than it is a condemnation of Humanitix.
darryll k. jones