SMOFS has been in the throes of a seemingly-interminable discussion, the core of which is the unresolvable issue of "what is a fan." (It's unresolvable IMO because "fan" means different things to different people; it's like asking "what color is truth?" or "how loud is beauty?") As part of this discussion, one person chastised us conrunners for not donating more proceeds from our conventions to things like libraries or public charities of some sort. She called the usual practice of most ongoing conventions with which I'm familiar (if you have a surplus, you use it to improve the next convention) "putting it into the party jar." She called conventions "parties you hold for an author." She made comparisons to fundraisers she's volunteered on of various sorts. The implication I got was that she believed that since (at least in the USA), most fannish groups running conventions are "charities," then everything we do should really a fundraiser for some sort of charitable function.
I was astonished. This completely misses the point of what fannish non-profits are for.
To simplify here, I'm limiting this to groups that are either formally recognized as 501(c)(3) non-profit, tax-exempt groups or probably would be if they went to the trouble of filing the application. There are other types of non-profit/tax-exempt groups, and the answers are similar for them, but I'm trying to not get side-tracked.
While we commonly call 501(c)(3) groups "charities," but in fact the full classification (as listed in the Exemption Requirements document on the IRS web site) is charitable, religious, educational, scientific, literary, and some other things that aren't directly relevant here. In essence, "charity" in the legal sense means something more than the narrow sense of "give money to the poor" or something like that
Fannish organizations aren't usually "charities" in the narrow sense, but "educational and literary societies." That doesn't mean they are any better or worse than narrowly-defined charities, and for tax purposes, they're the same sort of entity. For such groups, the purpose of their organization may be to run science fiction conventions. Their purpose is not "to raise funds for charity by organizing science fiction conventions." In fact, if they drafted their bylaws very narrowly and left out the "do anything a 501(c)(3) group is allowed to do" escape clause, it's vaguely possible that donating surplus funds from their convention to (say) a library might actually violate their charter and get them in trouble! In other words, the highest and best use to which a fannish 501(c)(3) organized to run SF conventions can put its operational surplus is (surprise!) running SF conventions!
I got the strong sense that the person in question didn't think that the educational-literary aspects of SF conventions were really important, and that we were just engaging in some tax dodge or taking advantage of a loophole in the rules to run a party for ourselves. This is very frustrating. While we sometimes may describe Worldcons as "parties for five thousand of our closest friends," you shouldn't take things quite that literally!
Here's another thing: If your fannish non-profit goes out and donates its surplus to some (narrowly-defined) charity or another, without having said up-front that you intend to do so, even if it's legal (it probably is unless you were stupid when you drafted your bylaws), it may tick people off when they hear about it. Some people who came to your event (and paid their share) may well complain, "I paid for an SF convention; I didn't want my money used to support Charity ZYX."
As a matter of public policy, the US federal and state governments give an indirect subsidy to various cultural-improvement organizations (and that's what most fannish conventions are, honest!) by exempting them from taxation and allowing donations to them to be deducted from individual tax returns. There's nothing dishonest about taking advantage of it. It's not a "tax dodge" or a loophole. How could someone go about organizing fannish events in the USA thinking that unless we give all our money to "real" charities, we're being deceitful?
If people who are (more or less) inside the fannish community think things like this, I can only imagine what a lot of people outside it must think.