Non Profits: Not All are Charities


As we get to the end of the year, we wish all of you a happy and relaxing holiday season. It is also the season of giving, where we contribute to our favorite causes, often represented by charities we donate to. We often use the words non-profit organizations and charities interchangeably. However they are NOT the same. 

Did you know that the National Football League (NFL) was classified as a non-profit organization for almost five decades?

While most charities are non-profits, not all non-profits are charities. Organizations become non-profits when they are classified by the IRS as exempt from paying taxes on the contributions and investment income they receive. 

 In fact many tax-exempt nonprofits are organized for the explicit purpose of advocating for the interests of the members, and NOT for social causes and the greater good which we associate charities with.


In this post we go into the differences between nonprofits and also focus on a nonprofit (not charities) whose dealing with the City of Cupertino, and the use of our tax dollars raises serious questions.

Different Kinds of Non-Profit Organizations 


The IRS has published guidelines describing the tax treatment for various kinds of nonprofits

Charities or 501 (c)(3) exempt organizations are typically what comes to mind when we think of nonprofits. 501 (c)(3) exempt organizations can be large organizations like the American Red Cross or local organizations like the West Valley Community Services who assist those in need in our neighborhood.

Another class of non-profit are business and trade leagues whose tax exemption is covered under IRS Section 501 (c)(6). These organizations are organized to advocate for the interests of their members. The National Football League (NFL) was a 501 (c)(6) exempt non-profit for about five decades before giving up its non-profit status in 2015!

Locally, the Cupertino Chamber of Commerce is a 501(c)(6) exempt non-profit, which advocates for its members. Out of the about 2400 registered businesses in Cupertino, less than 10% are dues-paying members of the Cupertino Chamber of Commerce.


Cupertino Chamber of Commerce & the $16,000/year Ghost Contract


For as far as anyone in the City Offices can remember, the Cupertino Chamber of Commerce has been sending a bi-annual invoice for $8000 ($16,000 per year) to the City of Cupertino. Under normal business practices the invoices are paid by the City for services delivered under a contract agreed upon prior to the delivery of the services.


However, the City staff is unable to locate any such agreement or contract against which the Chamber of Commerce was invoicing the city and getting paid for many years! After further investigation, the City Council was informed that the payments were made under a verbal agreement which no-one can reproduce. 


To summarize, there is:

  • NO Definition of the service the Cupertino Chamber of Commerce performs for the city
  • NO Criteria to determine whether the Chamber is fulfilling the terms of the contract for their invoices to be paid
  • However the City has paid hundreds of thousands of dollars to this organization whose charter is to lobby for its dues-paying members, without any contract in place.

Councilperson Kitty Moore ‘s scrutiny of a  line-item during the review of the City’s spending led to the discovery of these payments. These annual payments are in addition to the membership dues which the City pays to the Chamber, or the more than $60,000 paid by the City to the Chamber to run the ILoveCupertino website, or other concession the city provides like the free use of City facilities. 

City Elections & the Chamber of Commerce PAC

As an organization created to lobby for the interests of its members, the Chamber of Commerce sponsors PACs during elections. During the 2016 election cycle, the Cupertino Chamber of Commerce PAC committed campaign finance violations and was fined by the FPCC.

During the 2018 election the Cupertino Chamber of Commerce sponsored a PAC, to influence the results of local city council elections in the favor of certain candidates sponsored by the coterie of ex-mayors, The PAC used the name and the logo of the Cupertino Chamber of Commerce to solicit votes.

For many years, the city was paying $16,000 of our tax dollars, annually, without a locatable contract, to an organization which ran a PAC in support of city council candidates backed by the coterie of ex-mayors.


The Coterie of Mayors & Their Web of Influence


One challenge the residents face is that the coterie of ex-mayors have a well entrenched web of influence among local organizations which they have cultivated over the decades.


These networks have been built over the years via both soft favors like memberships in committees, endorsements & awards, and hard benefits, like the annual transfer of our tax-payer dollars to the Chamber of Commerce which then runs PACs to favor the coterie.

Whether it was shutting down already overcrowded CUSD schools in the middle of a 100 year pandemic or granting their favorite developer the unheard of privilege to build without any height limits, or sending our tax dollars to lobbying organizations which then advocate to get them get elected, the coterie of mayors does not have the residents’ best interests in mind.


Please stay alert and continue acting as a watchdog to keep them in check.

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