a nonprofit pharmaceutical service (is) not exempt as a charitable organization because it is operated for the substantial commercial purpose of providing pharmacy services to the general public.......although its services improve health, it is primarily a commercial venture
Recall that the Clinton Foundation is a charity exempt from tax in the US (501c3)
Every year the Clinton charity declares to the IRS that it has not engaged in any business, other than its tax exempt purpose.
Therefore every cent sent to it is treated as a donation, deductible from the taxable income of the sender.
What the Clinton Foundation does with money matters.
Here are two examples of things the Clinton Foundation did not and could not do:
- Clinton Foundation Global Beer Initiative - where the grog bill is a tax deduction
- Clinton Foundation Bordello Initiative - with high quality inputs, service quality certification and tax-deductible prostitution bills which appear as "Your Gift to the Clinton Foundation" on the credit card receipt.
There are grey areas not as likely to excite newspaper editors and headline writers.
Buying and distributing pharmaceuticals is one such area.
To avoid doubt, the US IRS lists what a 501c3 charity like the Clinton Foundation can and cannot do.
Clinton could get into the pharma business to his heart's content.
What he can't do, is lie about gifts and donations and pretend his commercial business is a charity.
- 184.108.40.206 Overview
- 220.127.116.11 Organizational Test
- 18.104.22.168 Organizational Test Requirements
- 22.214.171.124 Operational Test
- 126.96.36.199 Charitable Organizations— Definition
The Dual Test: Organized and Operated
IRC 501(c)(3) requires an organization to be both "organized" and "operated" exclusively for one or more IRC 501(c)(3) purposes. If the organization fails either the organizational test or the operational test, it is not exempt. Reg. 1.501(c)(3)–1(a)(1).
The organizational test concerns the organization’s articles of organization or comparable governing document. The operational test concerns the organization’s activities. A deficiency in an organization’s governing document cannot be cured by the organization’s actual operations. Likewise, an organization whose activities are not within the statute will not qualify for exemption by virtue of a well written charter. Reg. 1.501(c)(3)–1(b)(1)(iv).
In Federation Pharmacy Services, Inc. v. Commissioner, 625 F.2d 804 (8th Cir. 1980), aff’g 72 T.C. 687 (1979), the appellate court held that a nonprofit pharmaceutical service was not exempt as a charitable organization because it was operated for the substantial commercial purpose of providing pharmacy services to the general public. Although it provided special discount rates for handicapped and senior citizens in its area, it was not committed to providing any drugs below cost or free to indigent persons. Therefore, although its services did improve health in the area, it was primarily a commercial venture operated in competition with other area pharmacies.
On 3 November 2006 the Clinton Foundation HIV/Aids Initiative Inc IRS 990 return for the year ending 31 DEC 2005 was received and stamped by the IRS.
It declared that on 7 June 2005 it received a "Gift" of $1,847,653.00 from COPRESIDA of the Dominican Republic.
That return reports that it EXPENSED $3.3M in pharmaceutical purchases. That's a lot of pills, written off immediately and ready to ship by the pallet load.
The line describing expenses incurred in the care of partners $4.7M is fascinating. $4.7M is a lot of lavish care expense, even by US Presidential Standards.