Podcast Summary: Newt’s World – Episode 951

"Targeting a $2.8 Trillion 'Nonprofit' Tax Shelter"

Date: March 6, 2026
Host: Newt Gingrich
Guest: Scott Hodge, Tax and Fiscal Policy Fellow at Arnold Ventures; President Emeritus, Tax Foundation

Episode Overview

This episode dives into the complex world of nonprofit organizations in America, specifically the staggering $2.8 trillion in untaxed commercial revenue generated by large "nonprofit" entities such as hospitals, credit unions, universities, and various sports and arts organizations. Newt Gingrich hosts tax expert Scott Hodge to discuss how expanding the corporate tax base to include these large nonprofits could provide significant federal revenue without burdening working Americans or the broader economy. The conversation also explores the history of nonprofit exemptions, examples of questionable nonprofit status, and implications for college sports and tax reform.

Key Discussion Points and Insights

1. The Federal Deficit Crisis and Interest Payments

• Current Budget Situation:

  • The government is spending $1.35 for every $1 collected (04:20).
  • Net interest on public debt now exceeds the defense budget; within 10 years, it is projected to match combined defense and domestic programs (04:20).
  • Scott Hodge: “We are really threatening the future of the fiscal health of the country and the government by this profligate spending.” (05:40)

• Personal Analogy:

  • Hodge compares the federal situation to a family in crisis due to excessive interest payments, calling for urgent austerity and revenue-raising measures (06:01).

2. Nonprofits as Untaxed Corporate Giants

• Nonprofit Revenue:

  • About $2.8 trillion in business income is made by large nonprofits—hospitals, credit unions, universities, leagues—yet goes untaxed (06:44).
  • Tax-exempt status has enabled some organizations to operate as large for-profit businesses while avoiding taxes (07:43).

• Impact on Competition:

  • Hodge argues this is “government favoritism” and undermines the free enterprise system, forcing for-profit businesses to indirectly subsidize their nonprofit competitors (07:43, 13:21).

• Notable Example:

  • Kaiser Permanente: $127 billion in revenue and $9 billion in net income (profit) in 2023; CEO compensation around $12 million, with all profits untaxed (08:17).

• Origins of the Loophole:

  • The nonprofit corporate exemption dates back to 1909, initially intended for small, mutual aid groups, not major enterprises (09:34, 10:16).
  • Historical legislative warnings that the exemption would be abused have proven prescient (10:16).

• “Double Non-Tax Income”:

  • Television networks (e.g., ABC) deduct payments to nonprofit organizations like the Academy of Motion Picture Arts and Sciences; the Academy, in turn, pays no tax on this income— so the revenue is untaxed by anyone (12:22).

Memorable Quote

“Hospitals that claim to be nonprofit, except, by the way, they make a huge amount of money. They pay the hospital administrator a terrific salary. Every year they get bigger.”
— Newt Gingrich (07:43)

3. Sports Leagues and Nonprofit Status:

• Sports Organizations:

  • The Academy of Motion Picture Arts and Sciences, PGA Tour, and U.S. Tennis Association all retain nonprofit status despite massive commercial revenues (12:09, 20:05).
  • NFL and MLB gave up their nonprofit status due to political pressure and embarrassment (20:31).

• Collegiate Sports:

  • Universities are creating business entities (LLCs) for athletic departments, negotiating multi-million-dollar TV deals, and partnering with private equity—operating as de facto professional leagues (22:56, 23:22).
  • New NIL (Name, Image, Likeness) rules further blur lines between amateur and professional sports (26:27).

Memorable Quote

“College sports...are clearly now almost like the AAA baseball feeder system. And baseball men, you go to college in order to increase your net value when you get drafted. It’s a totally different model.”
— Newt Gingrich (24:22)

4. Policy Solution: Taxing Nonprofit Business Income

• Proposed Reform:

  • Expanding the corporate tax base to tax the business income of large nonprofits at the standard corporate rate could generate about $51 billion annually (14:30).
  • Hodge asserts this approach is economically neutral, fair, and levels the competitive playing field (14:41).

• Political Obstacles:

  • Any legislative effort would face fierce opposition from powerful hospital associations, credit unions, and other stakeholders (18:38).
  • Previous partial rollbacks of nonprofit tax exemptions happened in 1951 and for some insurance and health sectors, showing it is politically possible (18:44).

5. Next Steps for Broader Tax Reform

• Need for Simpler, Flatter Tax Code:
  • Hodge advocates for a flat tax, referencing Estonia’s simple and competitive system (34:11).
  • Simplifying the code reduces corruption, special-interest lobbying, and increases predictability and transparency (34:11, 38:37).

Memorable Quote

“Taxes should be neutral…should be simple, easy to comply with, easy to administer…predictable…and there should be some transparency. And with those core principles, we set out to try to analyze current tax policy, but also provide guidance for lawmakers…”
— Scott Hodge (38:37)

6. The Tax Foundation’s Role

• Background:
  • Hodge describes his journey reviving the Tax Foundation, from a small struggling group to a global organization (37:43).
  • The Tax Foundation advocates for neutral, fair, and pro-growth tax policy—both domestically and internationally (38:26).

Timestamps for Key Segments

• Federal Debt and ‘Autopilot’ Deficits: 04:01–05:47
• Explaining Nonprofit Tax Loopholes: 06:01–13:21
• Sports & Entertainment Organizations as Nonprofits: 20:05–23:22
• College Athletics Go Corporate: 22:44–26:15
• Private Equity in College Sports: 29:21–30:13
• Tax Reform & Flat Tax Discussion: 34:11–37:27
• Tax Foundation’s Mission: 37:27–40:04

Notable Quotes

• On the Deficit:
  • “The government is now spending $1.35 for every $1 that it collects in tax revenues.” (Scott Hodge, 04:20)
• On Corporate-Scale Nonprofits:
  • “At best, it’s government favoritism. It’s a subsidy from the taxpayers to these large businesses. And from a free market perspective, it’s unconscionable…” (Scott Hodge, 06:44)
• On Career College Athletics:
  • “It is really professional sports masquerading as university activities.” (Scott Hodge, implied, 22:56)
• On Simpler Tax Systems:
  • “[Estonia’s tax system] is about as simple as you can get. It’s especially good on the corporate side…a 20% rate for corporations, 20% for individuals, 20% for capital gains…That would be an ideal tax system to me.” (Scott Hodge, 34:11)

Memorable Moments

• The “Double Non-Tax Income” explained for Hollywood awards shows (12:22)
• Kaiser Permanente CEO’s massive salary versus ‘nonprofit’ status (08:17)
• NFL/MLB going for-profit out of embarrassment and politics (20:31)
• Rutgers and Utah universities establishing athletic LLCs for fundraising and athlete pay (23:22)
• Discussion of the perverse effects of NCAA coach buyouts and booster tax deductions (27:43)
• Brief tribute to Tax Foundation’s expansion to Brussels and international reach (37:43)

Conclusion

This episode reveals how a century-old tax provision intended for small charities now enables vast commercial empires to avoid billions in taxes while competing directly with their taxed counterparts. Scott Hodge and Newt Gingrich make the case for taxing the business income of large nonprofits—arguing it would generate revenue to ease the deficit, improve fairness, and better reflect today’s economic reality. The discussion concludes with a call for broader tax code simplification in the mold of countries like Estonia.

For listeners wanting more depth on fiscal policy, nonprofit tax law, and the shifting business of college sports, this episode is rich with historical context and contemporary proposals—delivered in a direct and insightful manner.