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Can a nonprofit owe income tax on business activities?

Short answer

Yes. A regularly conducted business that is not substantially related to the exempt purpose may create unrelated business income tax. Exceptions and exclusions can change the result.

Example

Using business profits to fund charitable work does not, by itself, make the activity related to the exempt purpose.

What to review

The activity, its frequency, relationship to the mission, revenue, expenses and applicable exceptions.

Official source: www.irs.gov/charities-non-profits/unrelated-business-income-tax

Related service: Nonprofit Organization Accounting

This answer is general information, not advice for your specific situation. Tax rules change, so please contact us to review your facts before acting.

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