Many nonprofits use earned income as a source of revenue generation. For example, it was estimated in 2008 that nearly 70% of the $1.4 trillion generated by nonprofits came from the sale of goods and services. However, despite its long-standing, common use in the nonprofit sector, the area of earned income for nonprofits is often wrought with misconceptions and misunderstandings which can lead to untapped sources of revenue or unknowingly jeopardizing the organization’s exempt status. Especially in light of current economic challenges facing the nonprofit sector, nonprofits should become familiar with the basic principles related to earned income to best help their organizations more effectively further their missions.
- IRS rules for determining whether business income is unrelated business taxable income
- Exceptions and limitations to unrelated business income
- Key considerations when choosing between a nonprofit and for-profit entity to house a business activity
- Other key considerations for carrying out your business activities.
|Gene Takagi is the managing attorney of NEO Law Group. He is also the contributing editor and publisher of the Nonprofit Law Blog. Prior to opening his independent practice in 2005, Gene practiced corporate law at Sheppard Mullin Richter & Hampton, during which time he was awarded Outstanding Barrister of the Year by the Bar Association of San Francisco. Gene has over 15 years of management experience in both the for-profit and nonprofit sectors and speaks and writes regularly on nonprofit legal issues for local and national audiences. Gene has a J.D. from UCLA School of Law and a graduate degree in nonprofit administration.|
|Emily Chan is an attorney with the NEO Law Group, a San Francisco-based law firm focused on representing nonprofit and tax-exempt organizations. Emily works with clients on corporate, tax, and governance issues and is the principal contributor to the Nonprofit Law Blog. She has also authored articles published in national publications and spoken to several groups and professional associations on nonprofit legal issues.|
NEO Law Group is a San Francisco-based law firm and Certified B Corporation that focuses its representation on nonprofit and tax-exempt organizations on corporate, tax, and governance issues.