Are 501c3 organizations allowed to engage in for profit business?
Answer See www.irs.gov/pub/irs-pdf/p598.pdf IRS Publication 598 “Tax on Unrelated Business Income of Exempt Organizations” and there you will see that such activities are generally taxable. The IRS has published “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.
