You are here:

Nonprofit Law/non profit lease to a profit??

Advertisement


Question
QUESTION: can a non profit lease to a for profit corporation to run a business?
None profit owns land and building for a gun club, can it lease it to a for profit business? In Oregon

ANSWER: You would need to contact the State as for any effect on any real property tax exemption. I have in my profile that this free forum is only for general questions relating to IRS federal exemption issues of 501(c)(3) organizations. Even if your nonprofit is not a 501(c)(3) organization the regulations on the IRS level would be similar.  The 501(c)(3) organization may lease its property to a for-profit business as long as it gets at least market-rate rental.  Also there would be particular treatment if the for-profit entity was controlled by persons who were insiders to the nonprofit entity.

Note that, after the lease, the nonprofit would need to continue to be engaged in a substantial amount of activities for which it was granted exemption by the IRS.

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

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.    



---------- FOLLOW-UP ----------

QUESTION: ((What do you mean with this statement??)) the nonprofit would need to continue to be engaged in a substantial amount of activities for which it was granted exemption by the IRS.

Answer
Well, there a some organizations that have all of their activities on their property, for example a social club, and, if they leased out that property they would not have any activities.  That would mean the the organization jeopardizes their exemption for inactivity.

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

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.  

Nonprofit Law

All Answers


Answers by Expert:


Ask Experts

Volunteer


Harvey Mechanic

Expertise

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 Harvey108@hotmail.com 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 "site:allexperts.com/q/nonprofit" without the quotes and then add your search terms before hitting enter.

Experience

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.

Education/Credentials

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

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


©2016 About.com. All rights reserved.