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About Harvey Mechanic
Expertise
US Federal tax issues of nonprofit 501(c)(3) public charities only. Establishing and maintaining legal requirements for such non-profit organizations in the United States, including Internal Revenue service filings and requirements. I will not be working on this free forum to answer questions about Nonprofit's unrelated or for-profit businesses or how to fill out forms. This forum is only for general questions about federal tax law, not as the law applies to your specific situation. To search my previous answers you can do a Google search:
site:allexperts.com/q/nonprofit
[with your other search terms appended].

Experience
I have been practicing law and especially the law of nonprofit organizations since 1990 when I was admitted to the New York Bar.

Education/Credentials
B.S. Columbia University in New York City, 1970

J.D. (Law Degree) Brooklyn Law School, 1990 -- Cum Laude

You are here: Experts > Real Estate > Tax Planning: U.S. > Nonprofit Law > Fund raising for non Profit car club

Nonprofit Law - Fund raising for non Profit car club

Expert: Harvey Mechanic - 11/5/2009

Question
Here is the question quick and simple can the wives form there own group, name it and collect money by selling hot dogs at our car shows and use proceeds for there own purposes in there groups name. Donations to troops and other services? This a non profit car club in California.
Thanks

Answer
They may certainly engage in taxable business activities as long as they comply with all normal tax and other regulations, such as health department food regulations and business licensing. They may not indicate that the money given is at all tax deductible. Section 502 of the Internal Revenue Code reads, in relevant part,
"An organization operated for the primary purpose of carrying on
a trade or business for profit shall not be exempt from taxation
under section 501 on the ground that all of its profits are
payable to one or more organizations exempt from taxation under
section 501."
http://bit.ly/Ti9ek

If, instead of running the sales business in an organization different than the nonprofit car club, they were to run it as part of the car club, then, if the car club has received IRS exemption determination, the sales activities would be treated by the IRS under the "unrelated business" rules. IRS Publication 598 "Tax on Unrelated Business Income of Exempt Organizations" at
www.irs.gov/pub/irs-pdf/p598.pdf
explains that such activities are generally taxable.

Harvey Mechanic, Attorney at Law -
Harvey108@hotmail.com

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