Homeless Inc. Case Study Essay

461 Words2 Pages

Winston could have several possible responses to the director’s proposal to purchase and operate a fast food franchise to help with Homeless, Inc.’s tax-exempt mission, which would result in additional revenue of 45%. The first response to find out for sure that the new fast-food would not fall under the unrelated trade or business income tax. There are three factors which must be met for Unrelated Trade or Business to apply. They are: there must be a trade or business by the organization, the trade or business is not substantially related to the tax-exempt mission or purpose of Homeless, Inc., and third that trade or business is regularly carried on by the business. In the case of Homeless, Inc. it meets two of the three factors. The first …show more content…

To be considered for exemption status four characteristics are considered. The four characteristics are: the organization serves some form of common good, the organization is not for profit, any net earnings do not benefit its members, and organization does not have any political sway. Of these four characteristics, the two that Winston should look at are the second and third which involve being a not for profit and usage of net earnings. With Homeless, Inc., projected a large increase they need to make sure they don’t give any of that money back to members of the organization or they will lose their exempt status. Another way the can avoid having these characteristics is taking that additional revenue and investing back into ways to help the homeless. Similar to how a university takes its profit and reinvests into endowments or renovations, Homeless, Inc., can invest in renovating various things around the community or donation to other causes. These might include shelter homes, food pantries, giving donations to Churches, the Salvation Army, and various other ways. Though Homeless, Inc. is projected to have increasing revenues if they go through with the purchase of the fast-food franchise, there are plenty of ways they can retain their tax-exempt status. Homeless, Inc. new additional business would be considered a related business and not subject to tax.