When a homeschool group has a fund raiser like a used curriculum sale or mini-exhibit hall is the income taxable?Thanks,Dorothy
Fundraisers are usually considered unrelated business income, meaning that the fundraiser activities are not related to your organization’s tax exempt purpose. In other words, a homeschool group’s purpose is education, not selling curriculum or hosting an exhibit hall.
Unrelated business income is taxable income. It’s called UBIT-unrelated business income tax.
From the IRS: Unrelated business income is income from a trade or business, regularly carried on, that is not substantially related to the charitable, educational, or other purpose that is the basis of the organization’s exemption. An exempt organization that has $1,000 or more of gross income from an unrelated business must file Form 990-T (and pay federal income tax).
Fortunately, the IRS has several exceptions to paying the UBIT tax:
- A $1,000 threshold allows that the first $1,000 in gross revenues from an unrelated business will not be taxed.
- If the fundraiser (or unrelated business) is run by volunteer efforts (i.e., no paid staff) then the proceeds are not taxed.
- If the fundraiser is not regularly carried on, such as a once-a-year unsed curriculum sale, then the proceeds are not subject to UBIT.
- If you are selling donated items, like in a garage sale, the income raised is not taxed.
One of these exceptions are bound to apply to most homeschool organizations.
So, while the income from an unrelated business activity may be taxable, in reality, no tax will be paid because one of the exceptions mentioned above applies.
Carol Topp, CPA