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Nonprofit Law/Non Profit Donation


I am working with a non profit. We are a listed 501(c)3 and we are in business to help families impacted with AIDS through the arts. We put on a couple theatrical shows a year. We have a lease for space in this old warehouse building. We pay rent as if it was a storage space. The space is large enough for us to put on our shows without worry of having to find rental space any longer.

The owner of the building is asking us to manage the space for other events in the room and for this we get 50 percent of the net profit.

When we rent the room we tell people that we are a 501(c)3 organization.

1. Can we tell them that the room is a tax deductible donation?
2. Is only the half of the net profit a tax deductible donation?

How should we word it to the potential renters of the room so they feel they are helping us out.

1. No.  As to charitable deductions, see IRS Publication 526 "Charitable
Donations"  which is available at:
on page 6 middle column under the heading "Contributions
You  Cannot Deduct" is "3. The part of a contribution from which
you receive or expect to receive a benefit"

It appears that you are renting the room as fair value and, therefore, no part is a deductible contribution.

2. There is no donation. In fact your income for management appears to be unrelated business income. IRS Publication 598 "Tax on Unrelated Business Income of Exempt
Organizations" at
explains that,  if products or services are not directly related to
the charitable, educational, religious or other purpose or function
constituting the basis for its exemption (other than for production
of income), then the activities are generally taxable.

Their exact wording is found in the middle column of page 3
"Unrelated business income is the income from a
trade or business that is regularly carried on by
an exempt organization and that is not substan-
tially related to the performance by the organiza-
tion of its exempt purpose or function, except
that the organization uses the profits derived
from this activity."

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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