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The Newman’s Own Exception

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, it is how they were initially set up.

Paul Newman started the brand as a for-profit corporation to sell his recipes. He donated all the profits to charitable causes. After he died, the company was passed to a not-for-profit foundation. That is where the problem arose.

Not-for-profits are not allowed to control for-profit corporations since that could be used as a way around corporate tax laws. The law required the not-for-profit to sell the for-profit corporation off 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 not-for-profit. There are also a few other minor requirements. This is an exception that was specially crafted for Newman’s Own, so most other not-for-profits will likely 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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