The Newman’s Own Exception

Congress has passed an exception to non-profit law that will allow the Newman’s Own company to continue operating as it currently does. Other charities might also be able to take advantage of it.

There has always been a problem with the Newman’s Own line of grocery products. It has nothing to do with their quality or taste. Instead, the problem lies with how the company was initially set up.

Paul Newman started the brand as a for-profit corporation to sell his recipes. However, he donated all the profits to charitable causes. After he died, the company was passed to a non-profit foundation. That is where the problem arose.

Non-profit foundations are not allowed to control for-profit corporations, because this could possibly be a way around corporate tax laws. The prior law required the non-profit foundation to sell the for-profit corporation by November of 2018. However, Congress has passed a new exception to the rule that will allow Newman’s Own to continue operating as it currently does, as Private Wealth discusses in “Paul Newman Still Giving to Charity, Even in Death.”

The exception is narrow. To qualify, 100% of the profits of the for-profit corporation must be donated to charity. The corporation also must be independently controlled and managed from the non-profit corporation. There are also a few other minor requirements. This is an exception that was especially crafted for Newman’s Own, so most other non-profits may not qualify.

However, it is possible that other people might be motivated to create similar businesses in order to continue giving to charity long after they pass away.

Reference: Private Wealth (May 30, 2018) “Paul Newman Still Giving to Charity, Even in Death.”

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