In the first part of this two-part series, we discussed the growing commercialization of the non-profit sector, and examined how and when heavy reliance on “fee-for-service” revenue may be inconsistent with an organization’s “tax-exempt purpose” under section 501(c)(3) of the Internal Revenue Code (the “Code”). In this second part, we will look at the basic rules for determining whether fee-for-service activity triggers unrelated business income tax (“UBIT”).
The issue of lobbying by 501(c)(3) public charitable organizations has long been a confusing area. As a consequence, many charities are under the impression they cannot engage in any lobbying at all. This article should dispel that notion and give some guidelines as to how much lobbying can be done and how the organization may safely elect to do so.