“The IRS has consistently held that the operation of a grocery business does not qualify as a charitable activity, even when located in a food desert or underserved community. Instead, these activities are considered commercial in nature, especially if they are operated by a for-profit entity, as is the proposed case here. In limited circumstances, grocery store activities can qualify as charitable if undertaken by nonprofit organizations for the purposes of (i) subsidizing food significantly below cost to indigent individuals or (ii) providing vocational training.
With regard to a building grant, the proposed project specifically involves a building to be owned by a for-profit entity. This approach creates significant private benefit concerns. A more than incidental private benefit can render even overtly charitable activities non-charitable. In a situation where as here, the operation as proposed is a non-charitable activity, the private benefit associated with ownership of the building only adds to The Endowment’s belief that the project is not charitable as proposed.
The issue at hand is not the shared commitment to improving food security. We support that objective as evidenced by our grants. Rather, the concern lies in the proposed use of charitable grant funds for a project structured as a commercial grocery operation involving private ownership and benefit. This situation involves several complex considerations. Addressing the matter through media channels is not productive and does not advance the community’s interests. It risks spreading misinformation and eroding trust.
We have engaged in multiple conversations with Growing Resilience/Northside Food Coop and have offered alternative ways to support their goals. However, their continued request for grant funding to support a grocery store particularly one owned by and operated as a for-profit enterprise, or an agent of such enterprise, is untenable.”