Nonprofits' Fat Profits

Congress and the Clinton Administration are scrutinizing the nation's nonprofit organizations, and none too soon. Nonprofits, thanks to their exploding business activities, now make up 10% of the U.S. gross domestic product--yes, 10%!

Two issues are at stake, both stemming from the burgeoning businesses of the nonprofits. First, there is fairness. Are loophole-ridden, laxly enforced tax laws giving nonprofits an unfair edge over for-profit businesses? Some nonprofits may be abusing tax exemptions and low postal rates to beat the heck out of competitors instead of bolstering the commonweal. One YMCA in Washington, D.C., has a virtual-reality golf course, shines its members' shoes while they work out, and charges monthly dues of up to $98. Other nonprofits are selling tax-exempt bonds that may also help their commercial activities. Unfair? Rivals sure think so.