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Nonprofit Law/Prize money from Races held to raise funds for charitable organizations


Hi Harvey,

A 501 c 3 holds obstacle course races (simialr to warrior dashes that are hosted by for profit orgs).  the proceeds after deduction for costs (no salaries) are donated to various charitable purposes at discretion of board.  The Board wants to offer small prizes for 1st place, 2nd and 3rd, total not exceeding $500.  This event is the main annual fundraiser and raises between $10K and $15K.  

Is the prize money unrelated business income and taxable?  The prizes do attract and induce competitve racers, therefore increasing revenues that will be donated to charitable purposes.

Thanks for you opinion.

The prize money is income to the individual winners and can not, therefore, be income to the 501(c)(3) organization.  The term "unrelated business income" only refers to income of exempt organizations.  For me to let you know something about that $10-$15k income, I would need to know whether the income is coming from donations or from other sources, and, if from other sources, what they are (for example, entrance fees for participants or admission fees to the race). After you give me that information I will reply further.

Harvey Mechanic, Attorney at Law -

P.S. This response is intended to be a general statement of law, should not be relied upon as legal advice and does not create an attorney/client relationship.  

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Harvey Mechanic


DO NOT GIVE ME INFORMATION THAT YOU WANT KEPT CONFIDENTIAL. I am an attorney and I volunteer time to answer general questions about U.S. Federal income tax issues of nonprofit 501(c)(3) public charities only. Those questions could be about 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 possible 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. If you do not make your question public then I will not be spending much of my donated time on answers that would not benefit the public. If you have other questions, please contact me at I will reply from my email. In any case, do not reveal confidential information to me until after I have contracted with you to provide personal legal services. My responses on this forum are intended to be general statements of law, should not be relied upon as legal advice, and do not create an attorney/client relationship. For me to consider your individual situation and how the law applies, I would need to gather extensive information about the situation. To search my previous answers you can do a Google search by "" without the quotes and then add your search terms before hitting enter.


I have been practicing law and especially the law of nonprofit organizations since 1990 when I was admitted to the New York Bar and I have maintained my status with the Bar since that time.


B.S. Columbia University in New York City, 1970

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

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