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Non-profit Opening Retail Store

Business Law discussions

Non-profit Opening Retail Store

Postby Turi » Wed Jun 29, 2016 4:19 am

Our non-profit is looking to sell product that relates to our exempt purposes. For example, we run a youth- sports organization and are looking to sell products to participants and others for the different sports that we do such as running shoes, baseball bats, running equipment, etc. What are the limits/rules on opening a retail store that sell such product.
Turi
 
Posts: 51
Joined: Wed Jan 08, 2014 8:36 pm

Non-profit Opening Retail Store

Postby Meng » Wed Jun 29, 2016 12:16 pm

IRS Publication 598 "Tax on Unrelated Business Income of Exempt

Organizations" at

www.irs.gov/pub/irs-pdf/p598.pdf

explains that,  if products or services are not directly related to

the charitable, educational, religious or other purpose or function

constituting the basis for its exemption(other than for production

of income), then the activities are generally taxable.

Their exact wording is found in the middle column of page 3

"Unrelated business income is the income from a

trade or business that is regularly carried on by

an exempt organization and that is not substan-

tially related to the performance by the organiza-

tion of its exempt purpose or function, except

that the organization uses the profits derived

from this activity."

The IRS has declared, "Nonprofit organizations that are granted

Federal tax exemption based on their mission-related purposes

are allowed by the IRS, within certain limits, to generate income

from unrelated business activities."

www.irs.gov/pub/irs-soi/97eounrl.pdf on pdf page 1

The organization could, if it has more unrelated activities than

the IRS's vague "certain limit", be jeopardizing its exemption

depending upon the facts and circumstances. Two of the main factors

is the gross income of the activity in relation to the gross income

of the organization's total income and staff time spent on the

activity.

An exempt purpose as to youth sporting is education of youth in sporting activities. Sales at a public retail sotry of sporting goods to persons outside of the direct client base of the youth to be educated appears to me not to be substantially related to the education of youth.  

Harvey Mechanic, Attorney at Law - [email protected]
Meng
 
Posts: 58
Joined: Thu Jan 16, 2014 10:24 pm

Non-profit Opening Retail Store

Postby Amhuinn » Thu Jun 30, 2016 12:31 pm

Our non-profit is looking to sell product that relates to our exempt purposes. For example, we run a youth- sports organization and are looking to sell products to participants and others for the different sports that we do such as running shoes, baseball bats, running equipment, etc. What are the limits/rules on opening a retail store that sell such product.
Amhuinn
 
Posts: 55
Joined: Fri Jan 03, 2014 9:23 am


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