Generally, an organization that has received recognition of tax-exempt status under Internal Revenue Code (“IRC”) § 501(c)(3) will not be subject to federal income tax on the organization’s income. However, with some significant exceptions, income generated from an activity unrelated to the 501(c)(3) organization’s exempt purpose(s) may be taxed at regular federal corporate income tax rates as unrelated business income (“UBI”). In addition to being subject to these taxes, 501(c)(3) organizations that engage in too much unrelated business risk losing their tax-exempt status.
Read More...