Home

Q: Unrelated Business Income - Can the org sell stuff and make money?

• Email

There is a thing called “Unrelated Business Income Tax” or “UBI.” For any funds obtained under UBI, you will most likely be required to pay income tax.   UBI is a tax placed on funding/monies received that are not generated by conducting an activity that generates revenue, which is not is directly related to an organization’s mission.
 
For example, in the simplest form, if your organization owns a parking lot, and it rents out the lot to a business so they have a place for their customers to park, that income is not related to your stated purposes.  So those funds would be considered UBI, and you (the organization) would have to pay income on those funds.  Even if you use that money to fund your programs – it is unrelated to your activities and you’ll need to report it at the end of the year.

According to the IRS, "For most organizations, an activity is an unrelated business (and subject to unrelated business income tax) if it meets three requirements:

It is a trade or business,
It is regularly carried on, and
It is not substantially related to furthering the exempt purpose of the organization.

Read more: Q: Unrelated Business Income - Can the org sell stuff and make money?

Q: Who can serve on my BOD - can it just be me?

• Email

In most states, you’ll at least want a president, a vice-president, a secretary and a treasurer or a secretary/treasurer.  

Most states will require at least 3 (three) individuals at a minimum.  So with 4 (four) officer positions on your board, that means one person can serve as both the Secretary and the Treasurer, if you only have 3 individuals.  The President should not also serve in any other Board position.  The other thing you will need is the addresses of each of your officers and members-at-large.  You should note that in MOST states, they will require the HOME address of your officers - you cannot use your organization or an office address for such individuals. So be sure to get that information from your BOD.  Again - this is MOST, but not all, states, so if you’re not sure - call your state to ask!

So those rules were state-specific, now let’s review the basic rules for the IRS, with respect to BOD officers.  According to the IRS, unless absolutely necessary, your officers should not be related, they should not live in the same household, nor should they live in a different state from the location of the organization’s primary delivery of services location.  So when forming your board, try to not include persons who are related and/or living in the same household.  Additionally, you should make sure officers are not “disqualified” individuals.

Read more: Q: Who can serve on my BOD - can it just be me?

Q: What is a Private Foundation?

• Email

A "private" foundation can be described as a nonprofit, non-governmental organization with a principle fund or endowment of its own. Foundations are dedicated to providing a common good for society and that good usually is in the form of providing funds for individuals, businesses who conduct research and development and nonprofit organizations. This year Private Foundations will give away billions of dollars in grants.

A "private" foundationon is organized for many reasons. The main reason is that Foundations are exempt from taxes. However, in order to retain this tax exempt status A FOUNDATION MUST BY LAW GIVE AWAY AT LEAST 5% OF ITS TOTAL ASSETS EVERY YEAR. This serves as an excellent tax shelter for companies and individuals. How these funds are distributed is left up to the organizations/foundations themselves. There are Foundations that specialize in giving aid to women who are widowed or divorced while others may give money for everyday living expenses, depending, of course, on your needs! Most private foundations are found right in your local phone book and all you have to do is call them to find out what they fund and what their requirements are to submit a request for funding.

If you are an individual, or you own a business that conducts research and development or provides job services, if you have a non-profit organization, or serve in city government, city department, etc. and your organization needs and wants to obtain a GRANT, you usually must first submit an Application and then a Grant Proposal to the Foundation or Government Agency, depending on their guidelines...BUT YOU MUST KNOW WHICH ONE TO APPLY TO BEFORE YOU START! You also need to know WHERE TO GET THE APPLICATIONS and you need to have a proposal to submit to these organizations or agencies, describing your program! There are over 35,000 private Foundations in the United States, and they all give money away.

Read more: Q: What is a Private Foundation?