When is income taxable?

Description

Abstract: A 501(c)(3) organization generally is required to pay tax on income that isn’t related to its main purpose — even if that income keeps the not-for-profit afloat. This unrelated business income (UBI) is something to watch closely, because if the nonprofit is ever audited, the IRS will likely scrutinize its records to see whether it has accurately reported UBI. This article describes the kinds of activities that generate UBI, along with some exceptions. A sidebar discusses whether charitable gaming is considered UBI.