Expert: Harvey Mechanic - 10/18/2007

Question
QUESTION: Can a non-profit organization (such as a public or private school, religious or
non-religious) sub-let or rent out their facilities without jeopardizing their non-
profit status or creating additional accounting challenges?   Does it matter
whether the entitiy renting (school) is religious or non-religious?  Thanks! Chris

ANSWER: It can rent out without jeopardizing status as rental income is not considered unrelated business taxable income unless the property is debt financed. You would need to get at least the market rate rent unless the organization rented to is also a nonprofit.

pages 14-19 on Unrelated debt-financed property.

www.irs.gov/pub/irs-pdf/p598.pdf


Harvey Mechanic
Attorney At Law
Harvey108@hotmail.com



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

QUESTION: If a summer camp that charges for enrollment rents space from and then conducts the camp at a school, does the conducting of that "for profit" business on the school (non-profit) site cause any additional conflict, or is the original answer the same?

Answer
When I referred in my original answer to renting to a nonprofit organization, that meant to a nonprofit 501(c)(3) organization that is going to use the space for one of its exempt purposes.  Simply because they charge fees does not change my earlier answer.

Harvey Mechanic
Attorney At Law
Harvey108@hotmail.com