Question: Our tax-exempt organization has begun a program that we believe will generate income to offset costs of our operations; however, it is not directly related to our mission. Are we subject to tax on these activities?
Answer: Likely, yes. Income from activities not substantially related to your tax-exempt organization’s mission are generally subject to unrelated business income (UBIT) even if you will use the profits to support your mission. This means that you would be subject to 21% tax on net income from these activities exceeding the $1,000 standard deduction. It is also important to note that too much UBIT can, in some circumstances, jeopardize an organization’s tax-exempt status.
You have a couple options to reduce the tax burden as well as protect your tax-exempt status.
Please select this link to read the complete article from OSAP Strategic Partner Clark Schaefer Hackett (CSH).