Non-Taxable Nonprofit Activities

Sometimes it can be confusing for nonprofits to differentiate between “related” and “unrelated” activities. Fortunately, the IRS has declared that some activities will not be taxed, even if they aren’t related to the nonprofit’s purpose since there can be a fine line between “related” and “unrelated” business activity.

Some of the activities include:
•Activities in which nearly all the work is done by volunteers
•Activities carried on primarily for the benefit of members, students, patients, officers, or employees (such as a hospital gift shop for patients or employees)
•Sales of merchandise that has been mostly donated to the nonprofit (such as a thrift store)
•The rental or exchange of mailing lists of donors or members
• Distributing incentives that are worth less than $5. Examples are stamps or pre-printed mailing labels given as incentives for donating money.
To learn more about rules your nonprofit must follow to retain its tax-exempt status, contact your nonprofit accounting professional.