Charitable Programs vs. Commercial Activities

Tax-exempt organizations engage in a wide variety of activities.  If an activity is commercial and not related to the organization’s mission, the activity may create unrelated business income.

Unrelated business income is subject to tax and must be reported on a Form 990-T, which must be available to the public. 

Importantly, not all commercial-like activities generate unrelated business income.  I advise clients as to whether the following types of income or activities create unrelated business income subject to tax:

  • Dividends, interest, royalties or annuity payments
  • Rental income
  • Sales of capital property
  • Corporate sponsorships
  • Licenses of intellectual property
  • Income from debt-financed property
  • Advertising Income
  • Travel tours
  • Gambling
  • Affinity cards and mailing lists