So being the director/trustee of the non profit that owns part of the for profit would be a conflict if I am also the chairman and a majority owner of the for profit (which I am), but what about the other way around? I.e. a for profit holding company owning a for profit subsidiary and a non profit subsidiary, both of which where I am the chairman and a majority owner. Would this still be a conflict?
A: As previously mentioned, neither you, individually, nor any other for-profit enterprise, can "own" or "control" a nonprofit organization. A nonprofit does not issue shares, and has no owners, so there is nothing to own. Without an independent board of trustees/directors, a nonprofit will never achieve tax-exempt status, so it will be a for-profit enterprise.
Given this information, I could set up a for profit holding company, receive the donation, use it to:
A - purchase stock in my for profit beverage company (making it a subsidiary).
B- set up another subsidiary that would be a non profit for my aforementioned cause of providing grants to young entrepreneurs. (contingent upon clarity from the first paragraphs)
C - use it for other investments, etc.
A: If it's a nonprofit, then the investments would have no value to you personally, because you could never receive those profits. If it's a for-profit, then you can do whatever you want. But, a for-profit cannot own a nonprofit. And while a nonprofit can own a for-profit, you cannot personally gain from the profits of the organization.
So even if the donor makes the donation to the for profit entity, he is still entitled to the tax advantages of doing so, no different than if he were to donate to a non profit entity?
A: No. Charitable contributions are subject to specific rules dependent upon the type of recipient organization. A non-qualified organization can receive a grant tax free, but the donor cannot deduct the grant. See IRS Pub. 526.
Hope this helps.
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