1 ASSIGNMENT THREE Due last class session Grant Proposal or Event Plan Grant proposal must be real and complete Event Plan must be detailed plan for a specific event

2 NONPROFIT BUSINESS ACTIVITY Grantsmanship and Fundraising College of Public and Community Service University of Massachusetts at Boston ©2007 William Holmes

3 NONPROFIT BUSINESS ISSUES Tax Rules Tax Rules Business Options Business Options Building on Strengths Building on Strengths Business Planning Business Planning License, Copyright, Cooperative Ventures License, Copyright, Cooperative Ventures

4 NONPROFIT TAX RULES Must relate to organizational purposes Must relate to organizational purposes Requires organized bookkeeping and accounting Requires organized bookkeeping and accounting Doesn’t benefit individuals or non-charitable organizations Doesn’t benefit individuals or non-charitable organizations

5 ACCEPTIBLE NONPROFIT BUSINESS One-time or occasional events One-time or occasional events Activity clearly within organizational purpose Activity clearly within organizational purpose Specifically exempted activities Specifically exempted activities

6 MISSION RELATED NONPROFIT BUSINESS Mission related education Mission related education Mission related training Mission related training Mission related therapy or rehabilitation Mission related therapy or rehabilitation Mission related experience Mission related experience Mission related travel Mission related travel

7 NONPROFIT BUSINESS NOT ONGOING Once a year Once a year Irregular Irregular Special events Special events Not resembling regular business Not resembling regular business

8 NONPROFIT BUSINESS EXEMPTIONS: 1 Volunteer based Volunteer based For convenience of group For convenience of group Company sponsorships without clear advertising Company sponsorships without clear advertising Merchandise sold is donated Merchandise sold is donated

9 NONPROFIT BUSINESS EXEMPTIONS: 2 Permitted bingo games Permitted bingo games Rental of membership list Rental of membership list Entertainment at fair or exposition for agriculture or education Entertainment at fair or exposition for agriculture or education Dividends, interest, investment income Dividends, interest, investment income

10 NONPROFIT BUSINESS EXEMPTIONS: 3 Royalties from use of name, trademark, or copyrights Royalties from use of name, trademark, or copyrights Rents from real property Rents from real property Research grants or contracts Research grants or contracts Gains or losses from selling property Gains or losses from selling property Fee for mission related service Fee for mission related service

11 NONPROFIT BUSINESS TAXABLE INCOME “Regular Trade or Business Substantially Unrelated to Purpose” 1. Trade or Business: selling goods or service 2. Regular: frequency and continuity typical for that business 3. Substantially Unrelated: not directly contributing to organizational purpose

12 EXAMPLE NONPROFIT TAXABLE INCOME Selling mailing list to for-profit business Selling mailing list to for-profit business Using facility charging access to general public Using facility charging access to general public Selling crafts made by general public Selling crafts made by general public Offering unrelated service to the public Offering unrelated service to the public Travel tours without education related to purpose Travel tours without education related to purpose Charging for use of name on product endorsement Charging for use of name on product endorsement

13 NONPROFIT INCOME: RISKS TO CHARITY STATUS Business must not dominate charitable activity Business must not dominate charitable activity Taxable income must not dominate nontaxable income Taxable income must not dominate nontaxable income Business must not be substantially increasing when charitable activity is decreasing Business must not be substantially increasing when charitable activity is decreasing Consider separating successful business Consider separating successful business

14 NONPROFIT BUSINESS PRINCIPLES: 1 Client run business is good for training and poor for profits Client run business is good for training and poor for profits Sales of goods has opportunity costs and needs experienced managers Sales of goods has opportunity costs and needs experienced managers Sales of services need skilled service providers Sales of services need skilled service providers Key on unmet needs Key on unmet needs

15 NONPROFIT BUSINESS PRINCIPLES: 2 Develop business plan Develop business plan Start small, minimize risks Start small, minimize risks Get advice from other nonprofits Get advice from other nonprofits Beware demands on program Beware demands on program