Koch Brothers, Worth $50 Billion, Sue Widow Over $16.00 of Nonprofit’s Stock (Secret Owners of Cato)

[starroute]

15. This is confusing -- how could a non-profit even *have* shareholders?

I mean, this is not some abstract point of law or something that an organization could "get away with" thanks to clever accountants. If you're a non-profit, you don't have either shareholders or private owners. If you have shareholders, you're not a non-profit.

That IRS definition quoted in the OP isn't saying a 501(c)(3) can have private shareholders as long as they don't get rich off it. It's saying there can be no private shareholders, period. "To be tax-exempt under section 501(c)(3) of the Internal Revenue Code, an organization must be organized and operated exclusively for exempt purposes set forth in section 501(c)(3), and none of its earnings may inure to any private shareholder or individual."

So just what is this fight really about?

http://articles.bplans.com/small-business-legal-issues/running-your-nonprofit-corporation/192

Like any corporation, a nonprofit has a board of directors to make important policy decisions, officers (president, treasurer and secretary) to oversee and manage the day-to-day operations of the organization, and possibly employees to do the work.

Unlike regular corporations, however, nonprofit corporations do not have shareholders or owners. (Nonprofits are owned by no one person or group of persons and cannot be sold. In the event the directors of a nonprofit want to dissolve the corporation, they must distribute all of its assets to another nonprofit corporation.)