{"id":1981,"date":"2021-10-23T14:45:00","date_gmt":"2021-10-23T19:45:00","guid":{"rendered":"https:\/\/nonprofit-ninjas.com\/?p=1981"},"modified":"2021-10-27T08:12:02","modified_gmt":"2021-10-27T13:12:02","slug":"unrelated-business-income-can-the-org-sell-stuff-and-make-money","status":"publish","type":"post","link":"https:\/\/nonprofit-ninjas.com\/index.php\/2021\/10\/23\/unrelated-business-income-can-the-org-sell-stuff-and-make-money\/","title":{"rendered":"Unrelated Business Income – Can the org sell stuff and make money?"},"content":{"rendered":"\t\t
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So - We CAN Make some Money?<\/h2>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t
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There is a thing called \u201cUnrelated Business Income Tax\u201d or \u201cUBI.\u201d For any funds obtained under UBI, you will most likely be required to pay income tax.\u00a0\u00a0 UBI is a tax placed on funding\/monies received that are not generated by conducting an activity that generates revenue, which is not is directly related to an organization\u2019s mission.
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For example, in the simplest form, if your organization owns a parking lot, and it rents out the lot to a business so they have a place for their customers to park, that income is not related to your stated purposes.\u00a0 So those funds would be considered UBI, and you (the organization) would have to pay income on those funds.\u00a0 Even if you use that money to fund your programs \u2013 it is unrelated to your activities and you\u2019ll need to report it at the end of the year.<\/p>

According to the IRS, “For most organizations, an activity is an unrelated business (and subject to unrelated business income tax) if it meets three requirements:<\/p>

  1. It is a trade or business;<\/li>
  2. It is regularly carried on, and;<\/li>
  3. It is not substantially related to furthering the exempt purpose of the organization.

    <\/li><\/ol>

    There are, however, a number of modifications, exclusions, and exceptions to the general definition of unrelated business income. Based on information from the IRS:
    “The Internal Revenue Code contains a number of modifications, exclusions, and exceptions to unrelated business income.<\/p>

    For example, dividends, interest, certain other investment income, royalties, certain rental income, certain income from research activities, and gains or losses from the disposition of property are excluded when computing unrelated business income. In addition, the following activities are specifically excluded from the definition of unrelated trade or business:

    Volunteer Labor:<\/strong>\u00a0Any trade or business is excluded in which substantially all the work is performed for the organization without compensation. Some fundraising activities, such as volunteer operated bake sales, may meet this exception.

    Convenience of Members:<\/strong>\u00a0Any trade or business is excluded that is carried on by an organization described in section 501(c)(3) or by a governmental college or university primarily for the convenience of its members, students, patients, officers, or employees.\u00a0 A typical example of this is a school cafeteria.

    Selling Donated Merchandise:<\/strong>\u00a0Any trade or business is excluded that consists of selling merchandise, substantially all of which the organization received as gifts or contributions.\u00a0 Many thrift shop operations of exempt organizations would meet this exception.

    Bingo:<\/strong>\u00a0Certain bingo games are not unrelated trade or business.”<\/p>

    Have a question or need help setting up your tax-exempt, 501(c)(3), nonprofit organization?<\/strong> Email us directly<\/em>, and we’ll get back with you ASAP! Just click\u00a0HERE<\/a><\/span>\u00a0to send an email!<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t

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    Other FAQs<\/h5>