[shartshooter]

One question I had while reading this:

- Should non-profits be allowed to "invest" their tax-exempt donations?

It seems that non-profits should obtain their funding through grants or donations. Investing, on the other hand, seems like the opposite of "non-profit"

As a personal aside, I've recently been introduced to a few folks who seem to be doing extraordinarily well financially. It turns out that they all run "non-profits." And not just any non-profit, but firms that were started by their parents.

Question for everyone: I'm not nearly as aggressive about finding tax deductions as I could be. Am I just a suck here?

[dbrueck]

Two things to consider: it seems reasonable for any organization - including a non-profit - to save some for a rainy day, and anything that doesn't get used immediately and doesn't get invested loses value just by sitting there (due to inflation).

IMO neither of those is enough to warrant a blanket "sure, why not?" answer to your first question and for there not to be any restrictions at all, but off the cuff it doesn't seem terrible.

As to your 2nd question: assuming you live in the U.S., it follows the laws of diminishing returns. It might be worth it to sit down with a non-sleazy tax adviser one time (and again each time you have a major life event) to make sure you're not missing anything big and/or easy, but pursuing every possible honest deduction is exhausting and time-consuming and so you eventually reach a point where chasing that next deduction is not worth your time.

[yellow_lead]

A church where I grew up has a large endowment from a previous family in the area. If they didn't invest their money, the endowment wouldn't last. Just an example. Not to say I'm in favor of church's non profit status or this particular point, but inflation could hurt for them if investing weren't allowed

[habosa]

> Should non-profits be allowed to "invest" their tax-exempt donations?

Almost definitely yes because so many uses of funds are also investments. Ex: a church buys valuable real estate to use as their main site of worship.

However maybe the returns on investment should not be tax-exempt in perpetuity!

[vineyardmike]

Not to take a side, because you're right that there are a lot of ways people exploit this, but there are reasons why a charity may legitimately want to invest.

> Investing, on the other hand, seems like the opposite of "non-profit"

There's two ways to look at this. You can consider investing in the capitalist sense where you're trying to make money and profit, and maybe the managers exploit the system, but you can consider it in a different perspective: wealth preservation and time-deferral of resources to reduce economic dependency of donations.

For example, universities often have large endowments. Universities take in small streams of money which may fluctuate with the economy and occasional massive donations, and then once a decade build a very expensive building. They probably want to protect the monies in that constant stream from inflation and economic cycles until they need to build a new building. Beyond time-deferral of resources, sometimes universities (or alum) establish a fund that should pay out continuously for eg. scholarships. By donating $1M, you can provide a 50k payout (5%) to a student, forever, and see modest growth of the fund above that (eg. ~2%) to cover inflation. This ensures that a one-time act of charity can last more than a few years.

> I've recently been introduced to a few folks who seem to be doing extraordinarily well financially. It turns out that they all run "non-profits.

Yea, maybe we need to consider the exploitation of non-profit exemptions and how it can be "self serving". But consider an alternative story: rich parents give their kids a lot of money, so they don't need to work to pay bills. This frees them to work low-pay charitable jobs because they have a separate trust fund to cover cost of living.