Discussion:Non-profit
From TaxAlmanac
Discussion Forum Index --> Tax Questions --> Non-profit
| 26 June 2006 | |
| Anyone do any work with non-profits? Non-profit (not 501(c)(3)) trade organization licenses trademark, gives no-compete and gives up membership list in exchange for approxiamately $70,000,00 a year in advertising space in a magazine. Is 70K income to non-profit? Other issues? | |
| 26 June 2006 | |
| I have not worked with tax-exempts for a couple of years now, but it sounds as though the exact facts and circumstances will determine if the value of the barter is program revenue. If not program revenue, there could be UBIT issues. | |
| June 26, 2006 | |
| Your organization may just have donated services. Check line 82 on the 990 for a place for that. I think the facts you need to look at are whether the advertising was used for the orgs exempt purpose and not to turn a profit, e.g. Public Service ads. | |
| 26 June 2006 | |
| This barter sounds to me like unrelated business income as taxref said. If however the income is earmarked as a donation to the non-profit and not as income, then you may have a line there that will help. | |
| 26 June 2006 | |
| its a trade organization that uses ads to solicit membership; association news; advertise association services. I don't think that would be UBI. It is not a donation but in exchange for use of trade association clout; e.g., this is the official magazine of XXX; use of trademark and logo and access to membership. It seems, even if it is income, as long as it is related to exempt purpose, it won't be taxable anyway. | |
| 26 June 2006 | |
| You are correct Matt...if it is income that is related to the exempt purpose, then it is not taxable. If the trade org uses ads and then has income from ads, then this would not be unrelated income I don't think either.... | |
| June 27, 2006 | |
| This one could be a little tricky. If the organization is "selling" its membership list to a commercial entity, this type of income could be treated as UBI. The IRS sees this type of transaction as rental of membership lists rather than payment of royalty fees. You might want to look at PLRs 199938041 and 200149043 which discuss licensing of intangible assets to commercial entities. Otherwise, exchanges of donor/member mailing lists are specifically exempt from UBI if both entities are eligible under IRC Sec. 170(c)(2) or (3) to receive tax deductible contributions. IRC Sec. 513(h)(1)(B) | |
| 25 November 2006 | |
| Membership fees which are paid as general support for the non-profit. I have recorded these on Line 3 of the 990. However, they are also popping up on Line 4, Analysis of Income Producing Activities. I'm not quite sure what to do with them at this point. I don't think they are UBI but I also did not find an exclusion code for them. How do handle this? Many thanks. | |
| November 26, 2006 | |
| Chase, the IRS distinguishes between two types of membership fees. One is the kind where a person will pay a low amount -- $20 to $50 or so -- for the support of the organization. The member may receive the benefit of the organization's newsletter and maybe some discounts on seminars, but the benefits are insignificant. This kind of membership fee is recorded on line 1 and is counted as public support. For 501(c)(5), (6) or (7) organizations, the dues charged are usually meant to cover other benefits, rather than the organization in general. These types of dues cover use of facilities, subscriptions to magazines, etc. These dues are reported on line 3 of the 990.
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| 26 November 2006 | |
| Natalie-Thanks for the detailed response. I purchased 2 books on non-profits & neither one really handle this subject as detailed as you just did. Part of the $225 membership fee includes a subscription to an industry magazine. Does this make the whole amount subject to UBI or just the subscription fee value? Also, are membership retention expenses allowed to be netted off from the membership fees for UBI purposes?
As far as in-kind donations, its seems that these are not included on the 990 if they are related to the use of volunteers or facilities as no deduction is allowed the donor. However, in-kind donations of tangible items would be included on 990 as the donor would be allowed a deduction. Did I interpret that part correctly? | |
| November 27, 2006 | |
| It sounds like you are assuming that the dues are taxable. What specifically does this nonprofit do? What code section is it exempt under? Besides the industry magazine, do members receive other benefits?
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| 27 November 2006 | |
| It is a 501(c)(3) which holds monthly networking activities for its members, also has monthly speaker forum, and has workshops which the members may participate in. | |
| November 27, 2006 | |
| What is the organization's exempt purpose? I guess there's some kind of education component going on in these workshops and forums. Do the dues cover the workshops and forums? Or do members pay additional fees for attending these events? You need to determine the value of the benefits in relation to the dues charged. If the value of the subscription and any other benefits = the $250 dues, then the dues must be reported as membership dues on Part I. If the value is significantly less than the $250, then they probably could be reported as contributions. Now if the subscription is worth say $100, then the dues need to be split. The amount of dues that are above the value of the benefits get reported as contributions.
If the dues are to be reported on line 3 of Part I, the next question is what exemption, if any, does the revenue fall under? In order to answer that, you need to determine whether the revenue helps accomplish the organization's exempt purpose (which is why I asked what the purpose is). | |
