Nonprofit Law/rental income


I am on the board of a regional youth soccer organization. We currently rely on local towns to rent us there fields for practices & games. We are considering purchasing our own field. To help defray the costs of purchasing and maintaining a field, we are considering renting the field to other organizations when we are not using it. Would the rental income be considered unrelated business income and possibly jeopardize our 501(c)3 status?

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.

But there is an exception. On page 9 we see "Rents from real
property... are excluded in computing unrelated business taxable
income." However, there is an exception to the exception discussed on pages 15-20 as to Unrelated debt-financed property, and there we see that, if there has been recently debt-financing (like a mortgage),  rents are, at least to some extent, unrelated business  taxable income. There are exceptions to that exception to the exception later on page 17, right column, "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

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. For me to consider your individual situation and how the law applies, I would need to gather more information.  

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Harvey Mechanic


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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