Religious Organization Owes Taxes from Publishing Business

Key point. Federal law imposes a tax on the unrelated business income of churches and other tax—exempt organizations. There are some exceptions to this tax, including the sale of books that directly promote a church's tenets. But if the activity is primarily commercial, the tax on unrelated business income may be due.

The IRS concluded that a religious organization had to pay unrelated business income tax on net earnings from its publishing activities. The organization was established to conduct an institution of learning for the general education of students. The charter further provides that the organization is authorized to engage in all matters incidental to these purposes, including the publishing and dissemination of textbooks, curriculum, and other materials related to schools of Christian training. The organization has no affiliation with a particular church or religion, ...