With the market volatility of the last six months, funding sources and non-profits alike may be uneasy given memories of the 2008 recession. Although predicting future macro-economic forces may be impossible, it is always a good idea for 501(c)(3) non-profit corporations to seek to diversify revenue streams to prepare for shifts in funding.
From time to time we see nonprofit clients adding employees in states in which they haven’t operated before. Often it is just one employee, perhaps a development person working from their home or a shared workspace. Although hiring an employee in another state may not seem like a significant event, many businesses don’t realize that it triggers several compliance obligations.
Generally, exempt organizations are taxed on income from any unrelated trade or business activities regularly carried on by the organization, less any permitted deductions. Promotion of private companies is generally considered advertising – an unrelated business activity. If the recognition given to corporate sponsors is deemed to be advertising, then the sponsorship payment may be taxed as unrelated business income and will not be counted as public support for purposes of qualifying as a public charity.