UNRELATED BUSINESS INCOME
and a Noodle Company
In recent months I have spoken to many churches and written about Unrelated Business Income. As a reminder, Unrelated Business Income is income from an activity that is a trade or business, is regularly carried on, and is not substantially related to furthering the exempt purpose of the church. For example, renting parking spaces for special events; renting space on the church property to a for-profit school; a bookstore which sells more than just bibles, crosses, Christian education books. Unrelated Business Income is based on how the income is EARNED and not on how the income is USED.
Now, why do we have to worry about this income? Well it is because of a noodle factory.
In 1947 a couple of wealthy alumni donated the Mueller Pasta Co. to the NYU School of Law. The profits from the noodle company were used successfully to refurbish and expand the Law School and the funds became so important that the main hall on the campus was nicknamed “Noodle Hall”.
Controversy appeared when it was discovered that NYU was attempting to maximize profits by extending it own tax-exempt status over the pasta business. Finally, in 1950 the Congress passed a law limiting the extension of tax exemption only to organizations that were relevant to the original tax-exempt body.
So, our churches have to pay unrelated business income tax because of noodles.
Because of this noodle tangle the policy of the Presbytery is that all lease with FOR-PROFIT organizations must be approved by the Presbytery prior to a lease being signed. And just remember that just because an organization is named something that sounds NOT-FOR-PROFITy does not mean that it is. Before signing any lease please ask the renter for a copy of non-profit status and check on the status of the corporation on the Florida Sunbiz.org website (http://dos.myflorida.com/sunbiz/).
This information in this article is for educational purposes only and should not be taken as specific legal advice.