When is a business not a business? Exploiting business opportunities and enhancing economic returns by capitalizing on the income tax exemption of tax-exempt organizations

Article Abstract:

Tax-exempt organizations are subject to inconsistently applied rules regarding their susceptibility to taxation on income derived from unrelated trades or businesses. Careful and skillful planning may avoid investment income being characterized as taxable business income. However, change should be made to the rules which are based upon form and not substance and which allow for mistakes and skillful manipulation. A better method of taxation would be to subject business income to at least one income tax level whether it is derived from a taxable or tax-exempt organization.

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Using (or abusing) an exempt organization's tax exemption

Article Abstract:

The IRS increasingly has sought to apply the unrelated business income tax rules to exempt organizations perceived as abusing their tax-exempt status by generating income unrelated to their charitable purposes. Nonprofits have entered many seemingly unrelated business areas, such as peddling their mailing lists, leading to the IRS crackdown. The series of cases and rulings discussed include the Sierra Club royalties decision, the American Academy of Family Physicians ruling, and various decisions involving real property and associated member dues.

Religious, Grantmaking, Civic, Professional, and Similar Organizations, Nonprofit Institutions

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Exempt organizations: business and other activities in an uncertain world

Article Abstract:

Charities which receive tax exemptions by IRC section 501(c)(3) have many new challenges to face as social and economic forces translate into law. New concerns include reliance on donations, management by professionals, changing activities, activism, concentrated wealth, unfair competition, scandals and the justification of exempt status. Future tax law changes could include the unrelated business income tax, exempt activities and endowment income.

Analysis, Donations, Income tax, Charitable trusts

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