Exempt-securities Books

This guide book is a little outdated as tax laws do change like Washington changes it underwear but overall, it is an excellent reference book and the basics are still true. Recommend it highly

What troubles me most about this book is that Kinau is giving the message that since certain individuals and groups with money are abusing the purposes of charitable organizations, everyone else should get in on the action too, at least until Congress decides to take action. I say two wrongs don't make a right.

There is a line in the disclaimer in the beginning of the book that states "A tax-exempt nonprofit think tank (TENT) is not just a tax shelter." Actually a tax-exempt nonprofit is not a tax shelter at all and it is not appropriate to use it as one.

Kinau starts out with a chapter detailing all of the tax loopholes used by corporations to dodge paying their fair of taxes. And what he writes is true. But he uses it to put you in the frame of mind that you can get even by starting your own nonprofit and using it to shelter your income.

In certain circumstances, forming such an entity might be of benefit to an individual. For instance, if you are already heavily involved in charitable, educational, or policy research type activities, moving those activities into a 501(c)(3) organization might well be advantageous. On the other hand, just making a large donation and volunteering your time to your favorite charity might be just as beneficial.

The problem with shifting income into a nonprofit is that the income no longer belongs to you. It belongs to the nonprofit and can ONLY be used for charitable purposes. Yes, it can pay you a salary. But then you have to pay taxes on the salary, so where is the benefit? Yes, it can pay for travel related to "policy research." This does not mean it can pay for your cruise to the Bahamas, your ski trip to Colorado, or a vacation in Hawaii.

Kinau talks about the complexities of administering a large for-profit corporation. This he compares to the relative simplicity of administering a small nonprofit think-tank. Apples and oranges. A small for-profit corp is only slightly more complex than a small nonprofit. If you are talking about setting up benefit plans and retirement plans, the differences get even smaller.

Kinau gives three examples of people who have formed their own "think-tank" nonprofit organizations. The first two seem questionable. First is "Wendy," a corporate employee who moonlights as a financial consultant to small businesses. She decides to form a nonprofit organization and shift her consulting income into the nonprofit. According to "Wendy," "Slight modifications to my financial consulting business side job converted the core business charter into a nonprofit endeavor encompassing the study of policies by test cases to maximize financial efficiency of small businesses."

Kinau observes: "Wendy altered her short letters of agreement for corporations and individuals into "grant agreements" rather than business contracts..." She also changed the premise of each job into a case study to be benchmarked, rather than a straight consulting job for pay. By making transactions with individuals and small business people more attractive through tax deductibility, she picks up an additional $5,000 in yearly business."

The problem here is that the businesses that hire her nonprofit to conduct these "case studies" appear to be receiving a benefit that is more than incidental. This means that the "grant" money that they pay to her nonprofit will not likely be tax deductible at all. However, it might be tax free income to the nonprofit. Then there is the problem of how to get the money out of the nonprofit into Wendy's pocket where she can use it to buy groceries. Can't do it without being taxed, although there is the possiblity of non-taxable fringe benefits pulling some of the money out tax-free. She could have done that with a small for-profit corp.

The second example is a man "Bill" who is an activist. And he waits tables at a restaurant for a living. Since he is already an activist and probably donates a good bit of money and lots of time to charitable causes, Bill is probably a very good candidate for a personal "think tank." But Kinau lists one of Bill's strategies as asking restaurant diners he serves to contribute to his nonprofit in lieu of giving him a tip. Thus his otherwise taxable tip income is converted to a tax deduction for the customer, and tax-free income to the nonprofit. Only one problem with this: Tips are taxable because they are payment for services received. In other words, had the diners not been served by Bill, they wouldn't have made a "donation." The IRS would recharacterize the "donations" as tips and then allow Bill a charitable deduction for donating the tips to his charity (if he itemizes).

Maybe Bill is real and maybe he is actually doing this and getting away with it, because, let's face it, when it comes to nonprofits the IRS is out-to-lunch. It's like some of my tax clients say to me, "Why can't I deduct my business suits? My previous CPA used to deduct them?" I tell them "Look, you can deduct ANYTHING on your tax return...until the IRS catches you."

Kinau does provide some information here that would surprise a lot of people. Yes, performing research and publishing studies on public policy does qualify as a tax-exempt activity. The definition of "charitable" is very broad.

Tax-exempt charitable organization's should be formed for doing good for society, not for sheltering income. If you need to shelter some income from business activities, a for-profit corporation works just fine for most people.

Another thing Kinau glosses over is how difficult it can be to get other people to donate to your personal charity, especially if they think you are just using the money to enhance your own lifestyle. I've help many small charities get their tax-exempt status, and fundraising isn't easy.

One of the things that makes it harder for legitimate charities to raise donations is that there are enough charities out there abusing the rules and creating bad press. It just makes it tougher for the real charities.

If you are thinking of starting a charity, I'd recommend reading "A Legal Guide to Starting and Managing A Nonprofit Organization" by Bruce R. Hopkins. It is written in a way that is easy to read and is technically accurate. I believe there is also a "Nonprofits for Dummies" book as well that I've flipped through and found it to be very good.

Kinau's book tells you just enough to get you into trouble. I don't mean to say it has NO useful info. The sections on filling out Form 1023 and Form 990 are instructive, but now outdated. Also, Kinau shows how to fill out Form 990-EZ and indicates that it is a 2 page form. He neglects to tell you that a 501(c)(3) is also required to fill out "Schedule A" which is about 7 additional pages and includes the public support test and lobbying questions. But I guess that's why he has a full page disclaimer.

I hesitate to give overly critical reviews of books since I respect the amount of work that goes into a book. But I suggest you look elsewhere for advice on forming your nonprofit, and for advice on using the corporate form for reducing your tax burden.

In Start Your Own Tax-Exempt Think Tank, serial entrepreneur and nonprofit think tank expert Jacques Kinau clearly lays out the benefits to be lawfully gained by establishing a "Think Tank" -- an organization that doesn't not have to produce any tangible product, but can nevertheless qualify for (to the lay reader) some astonishing financial benefits with respect to contemporary American tax laws. Kinau reveals how existing and planned tax law changes push more of America's total tax burden onto middle income taxpayers and wage earners, and how extremely profitable corporations dodge tax responsibilities the rest of us must endure through their creation of foundations. An informed and informative "how to" guide, Start Your Own Tax-Exempt Think Tank will enable anyone to establish a Tax Exempt Nonprofit Think Tank which can deliver to ordinary people the huge benefits typically the reserved province of high-rolling corporate executives. By following the instructions and resources provided by Kinau, anyone can incorporate their own tax exempt nonprofit think tank within in their own state in only a few weeks, and secure an IRS tax exemption within three months. If you are tired of being the cash cow for corporate America and their congressional allies, then give a serious reading to Start Your Own Tax-Exempt Think Tank.

Jacques Kinau is an economic specialist operating from the Institute for Research in Washington. His specialty is tax policy and his latest work, "Start Your Own Tax-Exempt Think Tank" is both an instructive guide as to how the powerful became much more so at the distinct expense of the middle class as well as how to correct these appalling disadvantages through self-help.

Early in the book Kinau provides information on tax refunds received by America's leading corporations in the Institute on Taxation and Economic Policy Report's "Corporate Income Taxes in the 1990s" which furnishes grist to make the blood of middle class taxpayers boil. For instance, in 1998 Pepsico, Pfizer, and MCI WorldCom all received whopping tax refunds to put them in negative territory where the tax collector was concerned.

If you want to talk about specific numbers, Kinau has them. For instance, Lyondell Chemical finished 1998 with a minus 55 percent rate. Texaco and Chevron also received lavish windfalls as the oil giants ended in negative territory at 37.2 and 26.4 percent respectively in the tax rate department.

The message embraced by Kinau is easily summarized in one succinct sentence: "Stop subsidizing wealthy individuals and tax-dodging corporations." Since the Reagan era income wage earners are paying a substantially increased share of the total U.S. tax burden. What we have seen from so-called public officials in Washington is a buddy plan for the wealthy. Leading corporations fund campaigns and their ardent lobbyists on Capitol Hill promptly collect on benefits and services received. This dangerous trend toward socialism for the rich has substantially increased under the Cheney-Bush Administration. As has been noted, George W. Bush is a huge corporation operating under the guise of a single individual.

The author provides a game plan for Americans tired of making up vast differences pocketed in "tax relief" for the nation's leading corporations. Noting that speakers on right wing advocacy group Fox News come from various think tanks in which tax benefits are received by those propagating the "greed is good" syndrome, he advocates that exploited taxpayers develop an effective game plan of their own to combat blatant exploitation for the benefit of the rich.

Kinau recommends that frustrated American taxpayers start their own tax-exempt think tanks. He sees the benefits as twofold, economic reimbursement in the face of financing corporate largesse at a discriminatory level and turning the tables on the propagandists by using the newly created think tanks as platforms espousing tax justice at long last.

The nuts and bolts aspects of how to start such a think tank are covered in meticulous detail in "Start Your Own Tax-Exempt Think Tank" as government forms are reprinted, along with instructions on how to answer questions relating to the start up process.

The message presented in this book is refreshingly straightforward. The Institute for Public Research identifies the problem squarely in one pungent paragraph:

"President Bush's team of economic advisors drawn from top universities, corporations, and conservative policy think tanks are driving down the road toward privatizing Social Security and reforming the tax system. America's middle income taxpayers are scampering for new ways to avoid becoming road kill."

Think of that term, so brief and powerful - "road kill." This is tragically what is happening as the nation's debt gallops toward the perilous $8 trillion mark with no end in sight as corporations reek a harvest and lobbyists gloat while an increasing number of Americans fight to avoid being "road kill" victims of corporate greed running amok.