QUESTION
Can a non profit engage in for profit activities such as making and selling a product?
Asked on Jan 07th, 2012 on Taxation - Oregon
More details to this question:
Can a 501 (c) 3 educational non-profit organization uses its tax exempt funds to invest in a four-profit venture that seeks to design and market an on-line video game that will charge people to use? A share of the profits from this venture would go back to the nonprofit for its charitable use, though a portion of the profits would also go to the for-profit partner in the proposed venture.
1 ANSWER
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Yes, if the for profit activity is not too large in comparison to the charitable activities. The share of profits allocable to the charity would result in unrelated business taxable income to the charity and it would have to pay taxes on them. If the for profit venture were a C corporation, the charity would not be taxed on dividends paid to it, but the corporation would pay tax on that income.
Answered on Jan 19th, 2012 at 4:15 PM