Episode 5: 501(c)(3) Taxation

Ever wonder how nonprofits do their taxes? In today’s podcast, Peter shares his expertise in 501(c)(3) taxation to discuss when nonprofits do and don’t have to pay taxes and how they can use that knowledge to their advantage. He briefly highlights the two things nonprofits need to achieve tax-exempt status: 1) being organized for charitable purposes and 2) operating exclusively for those charitable purposes. Interpreting what “operating exclusively” means relies on a helpful acronym used in the tax-exempt world: “UBIT,” or unrelated business income tax. UBIT requires nonprofits to ask whether the things they are doing, such as selling products to opening subsidiary businesses, are substantially related to their charitable purpose and therefore tax exempt.

From open source software to bicycles to girl scouts, Peter and Alexander explore the gray areas of tax exemption and how those gray areas can be used to increase the financial sustainability of a nonprofit.

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