Exempt Organizations Technical Guide: Disqualifying and Non-Exempt Activities - Trade or Business Activities
25 March 2024
SUMMARY:This Technical Guide addresses the impact of trade or business activities on the tax-exempt status of Section 501(c)(3) organizations. It traces the evolution of relevant tax laws from unrestricted business activities before 1950, to the introduction of unrelated business income tax in the Revenue Act of 1950 and subsequent refinements aimed at preventing unfair competition and ensuring activities are closely tied to an organization's exempt purposes. The guide outlines the legal framework, including definitions and tests determining whether activities are substantially related to exempt purposes or constitute unrelated business taxable income. It emphasizes the importance of maintaining a clear connection between income-generating activities and the organization’s exempt objectives to preserve tax-exempt status, providing a vital reference for navigating the complexities of tax regulations in the nonprofit sector.
EXPLORE: Excise Taxes on Self-Dealing under IRC 4941
For more information, please contact:
Desireé M. Bennett, EA - Principal
