Noodles and Taxes?

WWL (AM) was a longtime financial asset of Loyola University New Orleans, broadcasting starting in 1922. But taxing income from nonprofit institutions is a tricky matter–so tricky that WWL has been forever memorialized in the Internal Revenue Code.

Loyola radio telegraph class at the original WWL station, circa 1920

Senator Russell Long, son of famed Louisiana politician Huey P. Long and a member of the U.S. Senate Committee on Finance, is credited with having introduced a section into the tax code excluding some types of income from “a religious order or by an educational organization” (like, say, Loyola University New Orleans) from having to pay income tax. Typically a tax exempt organization is subject to income tax on income that is not related to its exempt functions, but this provision made sure that Loyola did not have to pay income tax for its WWL profits.

So how did WWL become forever engrained in the Internal Revenue Code? Take a look:

(15) Except as provided in paragraph (4), in the case of a trade or business—
(A) which consists of providing services under license issued by a Federal regulatory agency,
(B) which is carried on by a religious order or by an educational organization described in section 170 (b)(1)(A)(ii) maintained by such religious order, and which was so carried on before May 27, 1959, and
(C) less than 10 percent of the net income of which for each taxable year is used for activities which are not related to the purpose constituting the basis for the religious order’s exemption,

Other institutions have tried similarly, but unsuccessfully, to argue for exempt income from non-exempt sources. For example, New York University used to own a noodle company but was accused of running a “Macaroni Monopoly” when it was found they were extending their own tax-exempt status onto the pasta business (“The Law School and the Noodle Factory,” The New Yorker).

Found in the Archives is a recurring series of crazy cool stuff found in the Monroe Library’s Special Collections & Archives.

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