Certain nonprofit organizations are granted exemption from federal income tax (“tax exemption”). Most theories assume tax exemption is a subsidy for organizations such as charities that provide some underprovided good or service. To make the subsidy case, these theories assume that there should be a tax on nonprofit organization income but provide no justification for this assumption. This article contributes to the literature by considering corporate income tax rationales as a proxy for why we might tax nonprofit organizations. The primary two corporate tax theories hold that the corporate tax is imposed to: (1) tax shareholders (“shareholder theory”), and (2) regulate corporate manager control over large sources of wealth (“regulatory theory”). The article concludes that under the shareholder theory, tax exemption for charitable organizations is not a subsidy because such organizations have no shareholders to tax. Nonetheless, tax exemption for mutual benefit organizations such as business leagues qualifies as a subsidy because their members are arguably the equivalent of shareholders. Adopting the regulatory theory suggests tax exemption is a subsidy for all tax exempt organizations, as this rationale should apply to any tax exempt organization with the potential to amass significant wealth. Adopting this theory also suggests that to exempt an organization from income tax is to exempt that organization from a regulatory regime. Tax exempt organizations, however, become subject to federal oversight of political activity and self-dealing transactions. This article considers whether this separate regulatory regime is a sufficient substitute. While this article concludes that the charitable organization regulatory regime is a sufficient substitute for the corporate income tax, it also concludes that the regulatory regime for mutual benefits is lacking. This article proposes that it is time to revamp our tax exempt structure for mutual benefit organizations.