Ideas

What I did on my summer vacation

John Foye is a sophomore at University of Pennsylvania studying Finance and Materials Science Engineering. He is interested in start-ups, especially involving the solar industry. He loves spending time outdoors backpacking and climbing, and runs track for Penn.

Earlier this year, I returned to my hometown of Salt Lake City for the summer to work and take a few classes at the U. I had grown weary of working as a cashier (or a handyman, or a cook), and I really wanted to try something more challenging. Additionally, I wanted to be involved with some sort of nonprofit or social impact organization. Thankfully, I found Dharmatech on wiserearth.org.

Although they weren't advertising for a summer intern, I contacted Dharmatech via e-mail to find out more about them and if they had an opportunity for me to join their small team... if only for a few short months. Considering my business and engineering studies, I thought it would be great to see firsthand how a small tech company operates. After talking with them and discussing opportunities, they brought me onboard.

After talking with Sarmeesha about Dharmatech's transition from a nonprofit to an LLC, we began discussing more in-depth the reasons behind their decision. Specifically, the obscure tax laws the IRS has instated for nonprofits providing goods and services commonly supplied by for-profit organizations. These include infrastructure development nonprofits that provide capacity building, consulting, technical assistance, research, and training for the nonprofit sector. These nonprofits are deemed *charitable* simply because they provide the goods and services to other nonprofits at substantially below cost. To be precise, the fees collected cannot exceed 15% of the total cost of supplying the good or service (the “85/15 Rule”). Many 501(c)(3)-hopeful organizations know very little about this revenue requirement, and they subsequently have difficulty gaining certification.

With this initial insight into the subtle complexity of IRS tax law, we agreed that writing an article with the intent of publishing in a journal would help bring this topic to light. This is crucial because nonprofits consistently do not devote enough resources to infrastructure development. If more nonprofits supplied infrastructure development goods and services to other nonprofits (at 15% of total cost), then the efficacy of the nonprofit sector could theoretically increase. The article will be designed to educate the nonprofit sector about the specifics of this large (and crucial) aspect of tax law.

As the summer draws to a close, I’m looking forward to finishing the article and getting it published either in a peer-reviewed journal or informally online. I feel the article can only be a benefit to the nonprofit community, and hopefully a suitable medium for publication will arise shortly.