How do I know if we had income unrelated to our tax-exempt mission?

How do I know if we had income unrelated to our tax-exempt mission?

Because tax-exempt organizations generally operate for charitable or other beneficial purposes, most income received is exempt from tax under the Internal Revenue Code. Tax-exempt organizations are permitted to engage in income-producing activities that are considered to be unrelated to their exempt purposes. However, income from these activities may be taxable.

This potential tax liability requires every charitable nonprofit to know where its income is coming from, and determine whether any of its income is taxable under the Unrelated Business Income Tax (UBIT) regulations.

The following activities have been explicitly noted by the IRS to not constitute unrelated business income:

1.  Activities in which almost all the work is handled by volunteers.
2. Activities engaged primarily for the benefit of members, students, patients,      
    officers or employees.
3. The sale of merchandise that has been donated to the nonprofit (thrift store).
4. The rental or exchange of mailing lists of donors or members.
5. The distribution of items worth less than $5 as incentives for donating funds
    (stamps, pre-printed mailing labels, etc.)