VSP Vision Care’s five-year long legal battle to preserve its tax-exempt status is finally reaching a climax. The U.S. Supreme Court will decide Jan. 9 whether or not they will hear the case, officials said Tuesday. “We feel we have a very strong case,” said VSP spokesman Pat McNeil. “There’s a $1 trillion not-for-profit industry this could impact.”
Rancho Cordova-based VSP has a 2008 revenue estimated at $3.3 billion. The company serves more than 55 million members in the United States and Canada. The debate began in 2003 when the Internal Revenue Service ruled that VSP must pay taxes even though it is a not-for-profit organization. Earlier in the year, VSP appealed an appellate court decision upholding the IRS ruling and hired Dean Kenneth Starr to head up the legal battle. Starr is a former Whitewater special prosecutor and is now a professor at Pepperdine Law School. Starr petitioned the Supreme Court to hear the case last November.
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How is it that they are a non-profit? Don't they make a product and then sell it? That sounds like a business in a capatlistic system to me unless there is something I am unaware of here. Maybe a VSP employee or someone in "the know" could lend some insight.
The VSP Website states that:
"In 1960, VSP was granted exemption, pursuant to Internal Revenue Code § 501(c)4, from federal income taxes ."
IRC code 501(c)4:
501(c)(4) exemptions are given to civic leagues or organizations not organized for profit and operated exclusively for the promotion of social welfare, or local associations of employees. Net earnings are devoted exclusively to charitable, educational, or recreational purposes.[9]
The exemption applies so long as "…no part of the net earnings of such entity inures to the benefit of any private shareholder or individual."[10]
Not sure that they follow all the rules…but this is WHY they were given tax exempt status.
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