I want to start a nonprofit that will be a Christian school and those purposes would fall under 501(c)(3) tax-exempt status as being religious and educational. If I hired Christian singers and bands to sing for some of the fundraising would that be tax-exempt for being religious or would that be considered unrelated business income? If I started an academic summer camp program to raise funds and it was not religious, would it be tax-exempt for being educational or would it be considered unrelated business income?

ANSWER

The BIDaWIZ Team's Answer:

If you hired Christian singers and bands to perform at the event and they were compensated, then unrelated business income tax would be generated as you would fail to meet this requirement, "Substantially all of the work is done by uncompensated workers, IRC §513(a)(1)." An academic summer camp would also fail to meet the requirements as the camp would need to compensate members for it to be functional. As a general rule of thumb, in order for the fundraiser to be tax-exempt, the work must be charity work in every sense of the meaning in that those that provide services are unpaid volunteers.