Plus, Inc, Is a § 501(c)(3) Organization

question 145

Essay

Plus, Inc., is a § 501(c)(3) organization. It generates a small amount of net income each year. Ralph, the CEO of Plus, Inc., is concerned that Plus may be subject to the unrelated business income tax. Is there a materiality exception to this tax? A 501(c)(3) with "net income" does not automatically result in a UBIT classification. They must be conducting a trade or business that is regularly carried on and that is not substantially related to its exempt purpose.

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Definitions:

The BSA

Known as the Business Software Alliance, it's a trade group representing the world's largest software makers, focusing on copyright protection and combating software piracy.

Nonprofit Trade Association

A nonprofit trade association is an organization founded and funded by businesses that operate in a specific industry, focused on furthering their collective interests.

Software Piracy

The illegal copying, distribution, or use of software without the authorization from the copyright holder.

Word Processing

The creation, editing, formatting, and printing of text documents using computer software.