Charitable Profit

July 12, 2012 | 44 comments
By

About six months ago, I got an email asking (a) if I knew anything about low-profit limited liability companies (“L3Cs”) and private foundations, and (b) if I’d be willing to be a guest lecturer in a class, explaining what they were and how they function. I did know something (though at the time not much) about them, so I said I’d do it, then spent several weeks immersing myself in the theory and practice behind L3Cs.[fn1]

It turns out that Loyola’s business school offers an elective class in Social Entrepreneurship. The point of the class, from what I can gather, is to teach business students about how to create profit-making businesses that make the world a better place.

***

I’ve sensed some skepticism recently, both within and without the bloggernacle, about the propriety of charitable institutions making a profit (or, sometimes, about whether profit-making transforms a charitable institution into a non-charitable one). And I find that skepticism odd. Because of course a charity can (and, I would argue, in most cases should) earn a profit, at least some of the time.

Why? A couple reasons. First, money that’s just sitting around is actually losing value. And that’s the case for everybody (including you and me and for-profit businesses—some companies will use “sweep accounts,” which allow them to invest excesss cash overnight). I assume that charitable institutions don’t have steady revenue, revenue the timing and amount of which match exactly their administrative costs and charitable expenditures. That means that sometimes they’ll have excess cash, which, I hope, they’re earning a profit on that is at least equal to inflation.

Second, I assume that most charitable organizations have cyclical revenue streams. WBEZ, for example, does its explicit fundraising twice a year.[fn2] But then it has to use that money to fund its expenses for the next six months; if it just puts its money in its mattress,[fn3] the donations that people worked hard to earn and give become less valuable.

Moreover, often charities need money in countercylical waves. That is, the local homeless shelter probably faces significant need right now, as people are losing their homes, losing their jobs, and having their wages cut. But now is also probably not the optimal time for homeless shelters to raise money, because people have lost their homes, lost their jobs, and had their wages cut. If, however, the homeless shelter had blitzed the fundraising from 2002-2006 and invested that money,[fn4] it would have an easier time funding its projects in a downturn.[fn5]

Third, sometimes part of what a charity can provide is job training or other experience. As Jonathan points out, that’s one of the purposes behind Deseret Industries. And DI is not alone—Inspiration Kitchens in Chicago (where I still need to eat) teaches restauranting skills to the homeless and the poor, but also has a(n excellent, from what I’ve heard) restaurant that charges what look like roughly market prices.

I don’t mean to suggest that charitable profit-making is always on the side of angels, nor that charities should transform themselves into purely profit-making entities. I do want to suggest, though, that profit is not inimical to charity and, in fact, in at least certain situations, may be an important part of it,[fn6] and that rejecting charitable profitmaking whole cloth is naive, simplistic, and just plain wrong.

[fn1] L3C theory is way beyond the scope of what I want to address in this particular blog post, but here’s the short version: private foundations (think, e.g., the Bill and Melinda Gates Foundation or Mitt Romney’s Tyler Charitable Foundation, or those big family partnerships that seem to sponsor everything on NPR) usually provide grants or loans to organizations so that the organizations can fund their missions. Under certain circumstances, they can make equity investments in a group that works to further the private foundation’s mission. However, generally, an organization that a private foundation can invest in is not the type of organization that provides a market return. The theory behind the L3C is that the the private foundation will make a tranched investment in the L3C. Basically, it will invest in such a way that it takes a lower share of the L3C’s profits and take a higher share of its risks. That way, market investors would get a higher return (because part of their return is what would have gone to the private foundation) and face lower risk (because the private foundation is absorbing part of the risk), and will be more likely to contribute financing, too. Essentially, L3Cs are a way for private foundations to leverage their contributions.

Do they work? It’s fairly controversial, and that gets way, way beyond the scope of this post.

[fn2] It is trying to smooth its revenue by encouraging listeners to joint its High Fidelity program, which allows it to bill your credit card every month. But not all listeners do that, so our listening is still interupted every six months or so with a (shorter and shorter) fundraising drive.

[fn3] Which would be utterly insane.

[fn4] And by “invested,” I should point out that I’m pretty indifferent as to whether we’re talking passive stock-market investment or investing in an active business.

[fn5] Given that we tithe 10% of our income, I assume that donations to the Church have also fallen over the last four years, though I confess I have no idea if the Church’s business interests have done well or not.

[fn6] Though I don’t purport to have provided a comprehensive justification for charitable profitability; these were just a couple ideas that occured to me as I was thinking about this post.

44 Responses to Charitable Profit

  1. Howard on July 12, 2012 at 2:36 pm

    Thanks for posting this Sam. Profit is not a dirty word it spells security the only time it is a problem is when it spells greed. L3Cs sound interesting.

  2. Jenn on July 12, 2012 at 2:55 pm

    I’m definitely an outspoken critic these days of the LDS church’s financial practices, but I don’t think the fact that they make a profit is what bothers me. In my mind, a charity that stays out of the red is a good thing. But on top of it, I value a few other things:
    1) transparency: open the books and let people know what the money they are donating is being used for. set a shining example (don’t keep your light under a bushel)
    2) priorities: if you’re spending more on investing and profit than you are on the stated goals of your charity, you may need to re-examine your priorities
    3) investments in line with stated goals: if you are going to invest, invest in something that brings the world closer to your vision for it. For instance, invest in education resources (perpetual education fund is a fantastic example of this), childcare resources, hospitals, microinvestments, modest clothing stores, things like deseret industries, even some real estate. This would NOT include malls, tiffany stores, soda/fast food companies…

    Make a profit, sure. But be open about it and make sure it is consistent with the goals of your charity.

  3. Sam Brunson on July 12, 2012 at 3:16 pm

    Jenn,
    I thought about writing about transparency, but it was beyond the scope of what I wanted to deal with. I’ll keep it that way.

    if you are going to invest, invest in something that brings the world closer to your vision for it.

    I’m not sold on that; I’m a fan of socially responsible investing, but I’m also a fan of portfolio theory. Largely, I suspect, education and childcare resources and DI don’t provide anywhere near a market return. That’s no reason not to invest in them, but it may be worth juicing the return by investing in non-evil companies (Google, maybe?) that provide an above-market return (and that, while not necessarily contradicting your worldview, don’t necessarily advance it).

  4. DCL on July 12, 2012 at 3:23 pm

    Great write-up, Sam. Just want to add that the concept of UBTI treats non-profits as NOT tax exempt to the extent they actively engage in business activities unrelated to their charitable purpose. So the tax code encourages charities to be passive investors only. Not sure the extent to which this applies to religious organizations, though.

  5. Sam Brunson on July 12, 2012 at 3:27 pm

    DCL, thanks. You’re spot-on about UBTI; moreover, churches and other religious organizations that actively engage in business earn UBTI in exactly the same manner as non-religious tax-exempts.

  6. Kurt on July 12, 2012 at 4:38 pm

    I took a course called Social Entrepreneurship during my Masters work at the University of Utah. I’m sure it was similar to the class mentioned in this posting, except that it was housed In the policitical science department (public administration) rather than within the business school.

    I found our discussions on L3C’s to be both confusing and exhilarating.

    It was confusing in part because of its complexity, in part because of its relatively young age as a business structure, and in part because there aren’t a lot of case studies to examine. I’d also suggest that there isn’t perfect agreement as to what L3C’s are or why they can be formed. Which leads to the exhilarating portion of our discussions.

    L3C’s were exciting to talk about because they were new. But beyond their novelty, L3C’s represented innovative ways to form nonprofits. Many nonprofit leaders live by a motto that “nonprofit doesn’t mean no profit.” In other words, we don’t distribute our earnings like private companies, but we want to earn reasonable profits that we can put back into the business to develop new services, beef up existing services, or perhaps most importantly, make sure there is enough cash on hand to ensure your nonprofit doesn’t go under during difficult economic times. In Utah for example, it’s alarming how many nonprofits are in danger of going belly-up if the wind changes direction or speed too quickly.

    I recognize Sam doesn’t want to turn this post into an academic review of L3C’s and I think he did a good job of applying the concept and managing to do so in a succinct manner. If I understood his comments in footnote 1, however, I may disagree with Sam that L3C’s are essentially “a way for private foundations to leverage their contributions.”

    This certainly can occur. However, a significant reason behind my excitement about L3C’s is that they are the product of outside-the-box thinking. By that, I don’t mean the kind of outside-the-box thinking that went into the financial engineering that played such a huge role in the creation of the Great Recession. Rather, I see L3C’s as a way to form hybridized organizations that can represent a win-win scenario in which the private aspect gets a return on its investment and the nonprofit aspect gains access to funding and resources that could be out of reach were the organization a run-of-the-mill nonprofit.

    In fact, we discussed at length various ways to create an L3C to serve the community either more effectively than a traditional nonprofit could, or in ways that a nonprofit couldn’t even access.

    Even today, I keep my eyes out for the right opportunity to form an L3C in Utah and care for the poor and needy in ways that (1) private companies won’t, (2) the government shouldn’t (according to some of the political ideologies I subscribe to), and (3) nonprofits either can’t for one reason or another, or can’t do well enough.

    I don’t want to dive to deeply into ideas Sam indicates are beyond the scope of this posting and hope that my comments haven’t done that. I also recognize I may have misunderstood Sam’s footnote summary of the purposes or functions of L3C’s. However, since it’s a fairly nuanced topic and I was fortunate enough to take the Social Entrepreneurship course at the University of Utah, I wanted to briefly share my (perhaps unique) perception that under the right circumstances and with the right people involved, L3C’s can be used as a vehicle to transport various forms of aid to the needy who might otherwise go without.

    Sam, if you ever have the time, I’d love to see a post on potential L3C organizations that could be formed to reach a needy demographic that has slipped through the cracks, or that a traditional 501c3 couldn’t effectively reach (for any number of reasons), etc. I hope my comments haven’t distracted too much from your intentions for this posting, but rather hope they can catalyze thinking about new ways to care for those in need.

    Thanks for your posting. I have to admit, I never expected to see a discussion about L3C’s in the bloggernacle. Well done.

  7. clark on July 12, 2012 at 4:42 pm

    Jenn, did you read Nate’s post from a few months back on investing? I think he makes a pretty compelling case that if you are going to invest money then treat it as an investment. While I understand those who try to mix investing with social activism I think it pretty problematic at times. It’s fine to give money to good causes but don’t consider it an investment and expect to lose the money. i.e. consider it a contribution.

  8. Chris Kimball on July 12, 2012 at 4:48 pm

    Sam, your overall point makes consummate sense and I wonder that anybody questions it. You give some easy to understand examples why most charitable organizations should expect to have profit or net income or profit, at least in some periods.
    I’d add two observations:
    1. In my opinion the UBTI rules are pretty much nonsense if approached as a way to make charitable profit making fair or right. It isn’t necessary (as your post makes clear) and they don’t work that way. The UBTI rules make more sense–historically and in their current manifestation–if thought of as anti-competition legislation protecting certain kinds of businesses.
    2. Any discussion about charitable or tax-exempt profit making should take into account retirement accounts. That’s where the big money is, both in absolute dollars to invest and in explicit and constant profit making.

  9. J. Madson on July 12, 2012 at 4:50 pm

    We should no longer talk of this as an investment, the mall that is.

    “McMullin explains that City Creek exists to combat urban blight, not to fill church coffers. “Will there be a return?” he asks rhetorically. “Yes, but so modest that you would never have made such an investment—the real return comes in folks moving back downtown and the revitalization of businesses.” Pausing briefly, he adds with deliberation, “It’s for furthering the aim of the church to make, if you will, bad men good, and good men better.”

  10. Howard on July 12, 2012 at 7:45 pm

    Yes, J. Madson it appears that reality is beginning to set in with regard to City Creek. A destination mall either has to be a lot more than this one is or that concept is a delusion. CC mall sales will pull from the other malls around it with probably a slight net sales gain for the greater SLC area. It will likely hurt Gateway because it’s so close. But the brethren love having it across the street and it has a much better ROI than dying third world poor people. So who cares? In their own words: “Let’s go shopping!”

  11. Sam Brunson on July 12, 2012 at 8:50 pm

    Kurt, wow. I wasn’t going to go into any more detail about L3Cs, but with an invitation like that, I can’t resist. I’ll look to post something geeky, taxy, and at least partly related to Mormonism in the next week or two.

    Chris, the original purpose behind UBTI was to prevent what was seen as unfair competition (and, to some extent, to avoid an erosion of the tax base). And pension funds and other retirement accounts are an excellent example of tax-exempt vehicles with no real raison d’etre other than profit-making. But they are distinct from public charities—they’re exempt under a different provision of the tax code, and they function under a different set of tax rules.

    Howard and J. Madson, there’s real value in creating attractive urban spaces. I have no idea if City Creek qualifies, since it’s been years and years since I’ve been to Utah, but I take the Church at its word that its ROI on the mall is minor, and that it’s being done for other purposes. One of the nice things about not being a publicly-traded company (and, moreover, about not being able to distribute profits to stakeholders) is that the Church and other tax-exempt entities can do things that don’t make economic sense, but make sense in other ways. So, while I argue that profit-making is a permissible, and at time necessary, goal for charities, it is far from their only goal.

  12. christine on July 12, 2012 at 8:59 pm

    what kind of a return on investment would someone expect from putting money into or founding an LC3. anything below 6 % is not even close to beating inflation. or is it a donation and not an investment after all. it is difficult to have it both ways.

  13. clark on July 12, 2012 at 9:39 pm

    I hear Gateway is already hurting. I agree about the carrying capacity of a population and malls. You can overbuild malls as I think Provo/Orem found out the hard way. Even if City Creek captures a lot of the attention you can be sure something else will take over in a few years.

    That said I think you have to consider from the Church’s point of view what would have happened had the three blocks to the south of the temple had left largely abandoned. It wasn’t that long ago there were strip clubs and the like pretty close to the temple.

  14. Howard on July 12, 2012 at 9:51 pm

    Sam,
    I totally agree there is value in creating attractive urban spaces. If they are being built anyway for other good and useful reasons make them beautiful. Otherwise they are simple art and how much should we spend on simple art while the unfortunate die for want of what that money could buy? Unlike the cold slab sided box-like exterior of the Conference Center and it’s lifeless granite grounds. I would say City Creek definitely qualifies as attractive urban space but so would a park at a tiny fraction of the cost. Building City Creek was incongruent with the gospel, it is a Temple of spending an idol that unfortunate global citizens died for! Reconcile that choice with Christ, I can’t.

  15. Sam Brunson on July 12, 2012 at 10:07 pm

    “Building City Creek was incongruent with the gospel”

    How? Wait, don’t answer that. I’m not really interested in City Creek, or any specific investments or that matter. Would I have done something different? Of course. But frankly, I’d I had the power to undo architectural decisions, I’d probably use that power to reverse erase all vestiges of Trump. Sadly for New York and Chicago, though, I don’t have that power.

  16. Sam Brunson on July 12, 2012 at 10:11 pm

    Actually, as I think about it, that incongruity is a good thing. Scripture and modern prophets send mixed messages about money, about wealth, and about poverty. Which means it is our job to grow enough mentally and spiritually to make our own decisions. I may grow this idea later, but I’m personally a fan of not being told what to do and having a wide array of examples and options.

  17. Howard on July 12, 2012 at 10:26 pm

    that incongruity is a good thing I dunno it doesn’t set much of an example, kids singing “follow the prophet” and all.

  18. J Town on July 13, 2012 at 7:56 am

    I do not think that song means what you think it means, if you’re putting it in this context.

  19. Howard on July 13, 2012 at 8:42 am

    Okay, what do you think it means? And what do you think the children come to both consciously and subconsciously think it means as they grow up?

  20. Sam Brunson on July 13, 2012 at 8:44 am

    Howard, let’s please stay on topic. Primary songs are fascinating (I sing one to my daughters for bedtime whenever they request one), but have nothing to do with the propriety (or not) of tax-exempt organizations making a profit.

    (Now if the song were “Follow the Profit” . . .)

  21. christine on July 13, 2012 at 1:46 pm

    Howard, so are you seriously alleging that third world citizens would have a seriously higher life expectancy if LDS gave the money to some third world instead of building structures where they can go about their sacred business. Because to me there is not a direct logical relationship. Maybe you can point out how exactly that will work.

  22. IDIAT on July 13, 2012 at 1:48 pm

    Transparency, Priorities, Investments per stated goals. Some people think CC was a bad idea, others don’t. Can you imagine if every financial decision of the church was open for review, discussion, argument, and suggestion, the time and manpower it would take to address members’ concerns? Maybe we could install suggestion boxes in every chapel, and we, as members, could offer other suggestions of how things ought to be done. With roughly 5 million active members, and many who are social and evnvironmental activists, you’d have members promoting their own pet causes and notions of social justice and equality. Every person who chimes in and complains about the way the church uses money has an opinion, and the subtle undercurrent is “Church leaders don’t know what they’re doing. I know better than them.” The buck stops with the president of the church. If you don’t think he’s the Lord’s servant, don’t send the church your money.

  23. Howard on July 13, 2012 at 2:00 pm

    christine,
    Give money? No! Given the church’s laudable routine ability to teach native languages, place prostlizing missionaries in so many countries and manage many simultaneous high quality building projects around the world they are well situated and wel financed to take on well managed projects that efficiently provide food, water, vaccinations and basic doctoring to those facing or threatened by death.

  24. Howard on July 13, 2012 at 2:06 pm

    IDIAT,
    This isn’t about suggestion boxes. The act of building City Creek was incongruent with the gospe they profess to teach, it crosses the line.

  25. SilverRain on July 13, 2012 at 2:18 pm

    I know of at least three couples in my ward alone who are donating years of their lives and significant money to education and health-related activities in third world countries. They are giving up chunks of their lives with their families BECAUSE of the Church’s well-managed projects to efficiently provide food, water and healthcare to those who are facing and are threatened by death. My ward frequently organizes hygiene and educational kits to send overseas. We sew blankets and knit hats. We donate dolls.

    So my question, Howard, is which African country are you digging a well in? Which third-world vaccinations are you administering? How many health kits have you put together? How many blankets have you sewn?

  26. Cameron Nielsen on July 13, 2012 at 2:31 pm

    My in-laws are in Quito right now vetting local charitable/humanitarian organizations that the church may give money to. The process is quite rigorous, and I don’t see anything wrong with that.

    Also, to repeat my previous point, we’re so used to hearing of huge sums of money being throw at causes and wasted, it’s probably hard for most people to realize that in terms of bang-for-buck, the church’s efforts are likely exponentially more effective.

  27. J Town on July 13, 2012 at 2:37 pm

    Howard,

    “The act of building City Creek was incongruent with the gospe they profess to teach, it crosses the line.”

    With what gospel principle is the act of building City Creek incongruent? What line was crossed?

  28. IDIAT on July 13, 2012 at 3:41 pm

    “The act of building City Creek was incongruent with the gospel they profess to teach, it crosses the line.” So says you! And you just made my point. I don’t know enough about the CC stuff to discuss the merits. But the tone of your stance is “It has been revealed to me personally that the CC project was not in keeping with the gospel they profess to teach.” That’s substituting your alleged revelation for that of church leaders. Sorry, but revelation is a top down principle. You receive revelation and inspiration for your personal life. The prophet receives revelation for the church. We all have our opinions. I can think of a hundred things I might do differently than my church leaders. But we’d never get anywhere if church leaders had to obtain member approval of every expenditure made. I’m glad the church has for-profit ventures. It shows me they have been wise stewards of the talents (our money) they’ve been given.

  29. Howard on July 13, 2012 at 4:11 pm

    SilverRain,
    My point is compared to the church’s income and non-member third world need the contribution has been token. To address your questions,  my time and money both support my comments here.  As I have posted before, after spending 9 months studying and living with the homeless I donate most of my time and some of my money to the needy both domestic and third world.  I sponsor a South African AIDs orphan and I donate to an organization that provides clean water filters for villages of 3,000 people in Kenya and Honduras.  I am currently investigating volunteer tours in Africa for myself and a friend. Now please answer your own questions for me.

    J Town,
    See #14

  30. SilverRain on July 13, 2012 at 4:48 pm

    So, your point is that it is important for you to take your clearly extremely limited understanding of the Church’s finances and judge them on it. It is good that you are donating your time and effort to humanitarian efforts. Do you ever go out for a cheeseburger? Do you wear only clothes purchased from second hand stores? Because that is essentially what you’re implying: that the Church has no right to balance their budget and make decisions as to how to allocate their funds most effectively in the millions of places that need their attention. You’re saying that you know their purpose better than they do.

    You will note that I am not the one condemning others in a way that accomplishes nothing but inflate my own sense of superiority. I have, therefore, no burden of proof to answer those questions. And I am comfortable with what i am doing to serve in the kingdom of God. I am also comfortable with leaving the Church’s finances in the hands of the men who are called of God to manage them. If I didn’t believe in that, I’d not pay tithing.

    Rhetorically, do you pay tithing? Because if you don’t, it isn’t your business what happens with it. And if you do, and you understand the principle of tithing, you would understand that you still have no business in worrying how those funds are spent. You either pay tithing or you don’t. How it is spent is irrelevant.

    If you were truly concerned with the Church’s actions regarding City Creek, you would take it up with the people who could answer your questions, not here in a way that does nothing but vent your spleen into the netsphere.

  31. Howard on July 13, 2012 at 5:34 pm

    SilverRain,
    Everyone except church accountant’s understanding of the church’s finance is extremely limited, the church wants it that way!  But one can begin to piece together a picture of what is happening by comparison for instance:

    The church has dozens of humanitarian missionary supervisors working on dozens of water projects underway or recently completed around the world. http://www.deseretnews.com/article/700150533/LDS-Church-helps-as-Guatemalans-bring-water-education-to-their-village.html?pg=all

    If you think dozens is a lot then you will be very impressed with these Santa Barbra school kids who have raised money to provide 36 villages with clean water. http://www.hands4others.org/home.php

    Similar performance but there is quite a difference in resources between the LDS church and school kids!

    Do you ever go out for a cheeseburger? Do you wear only clothes purchased from second hand stores? Because that is essentially what you’re implying: that the Church has no right to balance their budget and make decisions as to how to allocate their funds most effectively in the millions of places that need their attention.. This is a very poor analogy.  I’m not interfering with the church balancing their budget and neither is their humanitarian aid. I’ve been open with my information. A couple of years ago the church added a fourth fold to its mission statement and I am pointing out an area that would benefit from that mission statement. 

    …vent your spleen into the netsphere.. Is that your idea of hyperbole?

  32. Peter LLC on July 13, 2012 at 5:35 pm

    How it is spent is irrelevant.

    Let’s not throw the baby out with the bathwater in a fit of righteous indignation–of course it’s relevant how tithing money is spent, and you won’t find a GA who would disagree.

  33. SilverRain on July 13, 2012 at 6:18 pm

    Peter, let me clarify. It is irrelevant to whether or not I pay. It is highly relevant to those who benefit from the Church’s programs, and to those who make the decisions as best they can whom to help.

    Howard, that is disingenuous. That is dozens (which, FYI, 36 is “dozens”) that the Church had going AT THAT MOMENT. Not EVER. And the “projects” counted generally involve more than one village. You are comparing apples to oranges and then throwing rotten fruit at the tree.

    If you rely on “piecing together a picture” from snippets here and there in order to condemn, you will find yourself feeling rather foolish in the end.

  34. Sam Brunson on July 13, 2012 at 7:06 pm

    Howard, et al., last warning: you’re on the wrong thread. I don’t care here about the Church’s expenditures; I’m talking specifically about investment and profit-making by tax-exempt organizations. And, because I’ve got two screaming children right now who are using all of my patience, I have none left to spend here. If you want to talk about whether the Church is providing enough humanitarian aid throughout the world, I’m sure you can find a place to do so. If you want to talk about investment strategies of nonprofits, you are welcome to stay here.

  35. Barb on July 14, 2012 at 8:52 pm

    Making making doing good is hopefully what people do no matter what they do for a living. I tend to prefer to volunteer my services. For instance, I volunteer when I write. My motives are also do to shyness. If anyone were to pay me for what I write, I would probably stress way too much about it and think it had to be too perfect. I also like to think of being purely altruistic but I get a lot of fringe benefits. For instance, people treat me with respect. I accept no goods or services. Being respected means a lot though. It is also gratifying to think something I do can also do good for others. When I work my day job, I try to do good and be nice but I always feel like it is not as valuable as I am being paid to represent the company while I take hotel reservations. But I think too much. I used to worry that when I was nice to people that it might result in a sale just because they like me and felt kind of guilty about it although the product was good.

  36. Barb on July 14, 2012 at 8:54 pm

    Correction” should read “making money doing good” Good thing you didn’t pay me for my 2 cents or I would have felt really guilty for the typo.

  37. AnneW on July 15, 2012 at 10:09 am

    Social Enterprise is the sandbox I play in professionally and I’m teaching a class at an area business school of the subject. Kurt, #6, check out Prosperity Candle in Massachusetts. They are the only L3C I’m aware of in the state and they’ve grown a wonderful business. One of their founders has said that the amount of time they’ve spent describing what an L3C is to potential investors/funders is daunting. It is a new model and I think until someone like the Gates Foundation puts their imprimatur on an L3C enterprise it’s going to be hard sell.

    As to the OP,I’m a huge proponent of nonprofits and others starting social enterprises as a way to diversify their revenue streams and deliver more effectively on their social mission. It’s not a model that all such organisations should adopt; it requires a great deal of strategic and business planning to determine if it’s a good fit. The social mission has to have primacy in the SE model. My irritation with the Church is the choice to invest in a mall. I’ve seen commentary that suggests that these revenue generating subsidiaries shouldn’t be held to the same standards we apply to the programs/mission of the church. I don’t buy it. President Monson saying “let’s go shopping!” during the ribbon cutting made me cringe. I’m bothered by the affiliation with an industry that has contributed to our society’s focus on consumerism, something that the church warns against. I hate the idea that there might be stores like Victoria’s Secret or Abercrombie and Fitch in a mall run by the church. UBIT, indeed.

  38. kaphor on July 15, 2012 at 3:05 pm

    Howard – the conclusion of what otherwise would be a long comment by me would suggest that if you expect the church to very directly, routinely, and substantially combat the social ills of the world you need to do two things: live your life in accordance with the commandments, and donate all you have to the kingdom.

    As it is now, the church asks for 10% + additional contributions in order to pay for the operating expenses of the church, and prudently save money to allow the church to continue its mission in times of financial turmoil (no one wants to see temple’s and buildings closing down because tithing expenditures fall in a world wide depression).

    We have an obligation to help those in need. I have no doubt the spirit has high impressed upon you a variety of areas where help is needed and currently no rendered. Nothing is stopping us from doing so on an individual level — and in fact I believe God is waiting for us to act and ready to bless our efforts when we do.

  39. Howard on July 15, 2012 at 6:16 pm

    kaphor,
    I walk in the Spirit and I would love to respond to your comment and SilverRains but I am restrained by the warning in 34 to keep my comments focused on investment and profit-making by tax-exempt organizations. While the church is a tax-exempt organization, social ills of the world are not profit-making which is obviously a significant part of the problem!

  40. christine on July 15, 2012 at 9:20 pm

    “An L3C is a taxed organization that operates with a stated goal of achieving a social goal while making a profit is a secondary goal.”
    In other words (Sam 34) an L3C is NOT a tax-exempt entity, only their interaction with the IRS is simplified for whatever that is worth, I guess their fees to their accountants are lower…

    As an aside I feel bad for poor Howard who probably like myself when I discovered the forum thought we could all rabbit on about whatever we wanted to….i guess if I talk about red cards that is Kent’s soccer thread….

  41. Sam Brunson on July 16, 2012 at 9:28 am

    christine, actually, an L3C is generally a pass-through entity, not a taxable entity. But that gets to a level of detail I don’t want to go into until I write a dedicated L3C post.

  42. Raymond Takashi Swenson on July 16, 2012 at 10:41 am

    A good part of the city block occupied by the City Creek Center was occupied since about 1860 by Zion’s Cooperative Mercantile Institution (ZCMI). ZCMI was a retail store whose profits went to the Church. Whatever the casenfor other churches, the LDS Church has a long history of involvement in retail sales.

    For several years when I lived in the San Francisco area, I taught part time at St. Mary’s College in Moraga, operated by the Christian Brothers order of monks. The Brothers also have a vineyard, and at college Christmas parties they handed out bottles of their winebas a Christmas bonus. Somehow I don’t think they were srlling their wine at a loss.

    What is unusual about LDS enterprises is the scale of them. Lots of religioys organizations earn income from businesses like the Brothers’ vineyards or from rent on donated lands. The jobs cteated by.building and opersting City Creek are more helpful to those empkoyed than if they were getting Church welfare assistance. The land.is an asset, and a reserve. If the Church continues to grow, it may need to occupy the office space there, just as it converted the Hotel Utah.

  43. christine on July 16, 2012 at 7:48 pm

    @sam,i only copied the definition from wikipedia i guess it could be wrong. the tax code of any given country that knows what it is worth, is of course way more complicated than the BoM or maybe even the cricket rule book. i am just grateful for the almost unbelievable skill of the accountant whom I do have on retainer in the US

  44. dagmar on July 17, 2012 at 1:01 am

    The scriptures clearly commend those trying to make a profit on their donations, as evidenced by the parable of the talents. Furthermore, Sam clearly clarified why this is the case for various and obvious reasons. as commented before, the mall currently brings people employment and many other benefits that would not have been had without the mall. Furthermore, we as non-prophets can not foresee the future of what benefits the (now) mall may bring others in the future. Remember also those that now do have employment and did not without the mall can now earn more money to donate to tithing, fast-offering, humanitarian aid, and what not funds, to help those third world country citizens that are starving. We can not always see the end from the beginning, but I know that President Monson only begins something with the end (goal) in sight, his prophetic sight.

WELCOME

Times and Seasons is a place to gather and discuss ideas of interest to faithful Latter-day Saints.