Not-for-profit status

Kenneth P. Eschete <k-eschete [at] nwu__edu> writes

>Is it possible for a non-profit institution to raise revenue by
>performing conservation treatments for other institutions, without
>threatening the non-profit status?

Yes. There are several criteria. The most important is that you do
not use the tax advantages of 501(c)(3) to compete unfairly with
businesses that do not enjoy this status. If you are providing
services that are scarce and that do not threaten a for-profit
conservator, or your purpose is educational, you should not have a
problem.

When you establish your IRS status (your initial filing), you are
asked how you expect to raise revenues for your not-for-profit
business. When I started The Center For Book Arts I included "The
printing and binding of editions" as an income source on the IRS
application, as well as in the Articles of Incorporation. The IRS
approved the application.

Our apprentices produced blank books which were sold in retail
stores, bindings for the Metropolitan Museum store, and portfolios
for a Metropolitan Opera fundraising project, as well as bookbinding
and printing jobs from walk-in clients. This all served an
educational purpose, in addition to paying 50% of the Center's
operating expenses. The apprentices learned the book crafts, sales,
customer relations, accounting, and general business practices. This
enabled them to become successful in the real world.

In a review about ten years later, the IRS did not have a problem
with that. They did have a problem with the Center renting workspace
to artists who were sole proprietors of themselves, and not
not-for-profit entities. The artists were printers and bookbinders,
and the IRS believed they were in competition with for-profit
enterprises who had to pay higher rents elsewhere. But they relented
when it was demonstrated that these artists were being incubated at
the Center, and would not be able to develop their businesses
without our assistance.

If you are in doubt about your particular situation, I would suggest
contacting the IRS rather than an accountant or attorney. A letter
of determination from the IRS puts you on a solid foundation. An
opinion from a "professional" can leave you with vague anxiety and
opens you up to more "professional fees" defending their opinion.

Richard Minsky
Founder, Center for Book Arts, Incorporated 1974


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                  Conservation DistList Instance 13:36
               Distributed: Wednesday, December 22, 1999
                       Message Id: cdl-13-36-002
                                  ***