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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 > Rental Income - churcy

Nonprofit Law - Rental Income - churcy

Expert: Harvey Mechanic - 11/6/2009

Question
Does a church have to file a 990T if it receives rental income
from another non-profit agency?

Answer
Whether the rental income is from a nonprofit or a for-profit is not an issue with the IRS. The issue is whether the rental is related to the church's religious and charitable mission. If not, then it is unrelated.
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.

However, see page 9 where the IRS has "Rents from real
property... are excluded in computing unrelated business taxable
income." But see pages 14-19 on Unrelated debt-financed
property. There you will see that, if there has been recently
debt-financing (like a mortgate) rents are, at least to some
extent, unrelated business taxable income.

Note from page 16 "If substantially all (85% or more) of the use
of any property is substantially related to an organization's
exempt purposes, the property is not treated as debt-financed
property."

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

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