Legal Definitions - feeder organization

A feeder organization is a business or trade entity that operates for the benefit of a tax-exempt organization. However, the feeder organization itself is not tax-exempt.

A non-profit organization that provides education to underprivileged children may have a feeder organization that sells merchandise to raise funds for the non-profit. The feeder organization operates as a separate entity and pays taxes on its profits, but its main purpose is to support the non-profit organization.

Another example could be a hospital that has a feeder organization that operates a gift shop. The profits from the gift shop go towards supporting the hospital's operations and programs.

These examples illustrate how a feeder organization can support a tax-exempt organization by generating revenue through a separate business entity.