Is it sponsorship or advertising? Know the difference between tax-free and taxable income

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Abstract: As a nonprofit you’re generally not taxed on your income, unless that money comes from a trade or business unrelated to your exempt purpose. An important exception to the unrelated business income tax (UBIT) rule is sponsorship income. If income is derived from a qualified sponsorship, it’s tax-exempt. However, if the income comes from advertising, it’s taxable. Thus, knowing the difference between sponsorship and advertising is crucial.