Can Non-Profit Organizations Sell Tickets to a Concert?

By Sarita Douglas

Whether a nonprofit organization can sell concert tickets, or conduct any other common fundraising activities, is a something it needs to consider before embarking on the project. The primary issue its fundraising team will want to take into account before making the decision to proceed is the way that the IRS will characterize the fundraising activity in relation to the nonprofit's tax-exempt status. The organization should also determine whether state registration of the event is required.

Unrelated Business Income

In general, a nonprofit maintains its tax-exempt status when it conducts activities that support the tax-exempt purposes of the organization, such as an animal shelter providing care for its animals. If an activity is unrelated, any income earned might be considered unrelated business income, which is taxable. The test to determine whether income is UBI involves meeting a three-part test: First, it must be from a business or trade activity. Second, the activity must be carried on regularly. Third, the business must not substantially relate to the organization’s exempt purpose.

Fundraising Activities

Whether a nonprofit organization can sell tickets to a concert depends on how the activity fits into the three-part test. A nonprofit chamber orchestra could sell concert tickets on a regular basis as part of its exempt purposes. A school support organization, such as a PTO, could sell concert tickets as long as it doesn't sell such tickets frequently or regularly. An annual fundraiser, for example, is not considered something that's carried on regularly.

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Paying Taxes on UBI

A nonprofit organization can pay tax on UBI and not lose its tax-exempt status as long as the UBI is only a small part of the overall income of the organization. However, dealing with this can be messy, with increased filing requirements and the potential need to defend the organization's other activities fitting with its exempt purposes. It is generally preferable to keep all fundraising activities within the exempt purposes of the organization.

Individual State Requirements

Nonprofit organizations should check any requirements of the state or states in which they are going to conduct fundraising activities. Many states require registration with the state charity organization, for example, before seeking contributions from state residents. The website of the National Association of State Charity Officials has a list of all U.S. state charity offices.

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When Does a Non-Profit File an Annual Report With the State of New Jersey?

State law governs the creation of and disclosure rules relating to various corporate and nonprofit entities that operate within state borders. New Jersey requires all business entities, both for-profit and nonprofit organizations, to file an annual report. How the nonprofit is organized will determine the agency to which an annual report is filed. The annual report is used by the state and the public to obtain basic information about the nonprofit organization. Filing the annual report is required in order to be considered an active business within the state of New Jersey.

Benefits for a 501(c)(4)

If you operate or have management responsibilities within a nonprofit organization, you may want to evaluate whether it satisfies the requirements of Internal Revenue Code 501(c)(4). In the event it does, there are a number of tax benefits of which the organization can take advantage that are only available to nonprofits that obtain tax-exempt status with the IRS.

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