In a story from the Chicago Tribune, "IRS Targets Non-profits That Manipulate System," it was revealed that there are certain nonprofits funded by builders and home sellers that make a "gift" to purchasers of up to 10% of a home loan for buyers who might not otherwise have enough money to afford the house. The builder or seller of the home then pays the tax-exempt (i.e., tax deductible) charity an equal amount plus a loan fee.
When we say we want all nonprofits to be financially self-sustaining, we want to make it clear that we are not talking about organizations that might be designed to manipulate the system for their own advantage. The IRS believes many of these programs do nothing more than raise the price of the home while allowing the sellers a tax deduction. If so, we are glad the IRS has sought to close down a clever device which abuses the whole notion of proper tax-exempt status.
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