About Pearson, the Golden Goose State Standards, And Then Some
On December 13, 2013, Pearson, Inc., agreed to pay a $7.7 million settlement for allegedly using its nonprofit, Pearson Charitable Foundation (PCF), to assist its profit-making parent corporation in developing educational materials– including software.
In this post, I would like to offer additional discussion of Pearson the For-Profit, Pearson the Nonprofit, and some friends both have made along the Common Core way.
I’ve been reading tax forms again.
Allow me to begin with a word about nonprofits.
Nonprofits 101
Any corporation is able to start its own foundation– the idea being that the foundation provides an opportunity for the corporation to spend charitably– and garner a tax break for doing so.
Under the US tax code, foundations fall under 501(c)– tax-exempt organizations. The tax-exempt code specific to public charities and private foundations is 501(c)3.
The 501(c)3 nonprofit is limited in its ability to lobby since contributors are allowed to deduct contributions. For this reason, some 501(c)3 nonprofits also have a 501(c)4 “social welfare” counterpart. The 501(c)4 allows for unlimited lobbying but not for tax deduction of contributions. Therefore, donors wishing to both support the lobbying and take the tax deduction are able to donate to the 501(c)3, with the 501(c)3 passing the money on to the lobbying 501(c)4.
Such activity is perfectly legal.
What is not legal is for a 501(c)3 to use its tax-exempt positioning in order to profit itsparent corporation.
It is legal for Pearson, Inc., to have its own nonprofit, tax-exempt foundation, PCF.
It is also legal for the for-profit Pearson, Inc., to donate up to ten percent of its taxable income. (Other stipulations are involved here, including the rule that to qualify as “publicly supported charity,” at least ten percent of PCF’s income must come from public support.)
As noted on the PCF 2011 990, Pearson, Inc., is the parent organization of PCF, with Pearson North America, Pearson United Kingdom, and The Penguin Group listed as