Distinguishing between earned and unearned earnings

As far as an IRS agent is concerned, nonprofit earnings comes in two flavors: unearned and earned.

Unearned earnings is often exempt from taxes, whereas earned earnings is taxed just like it will be to get a for-profit organization involved within a home business venture.
Unearned earnings is received from donations, grants, and also other sources to help the organization in its operation and mission. Often, the donors of unearned earnings count on absolutely nothing in return for their grants or donations, aside from obtaining the nonprofit apply the donated funds to its charitable
mission.

In contrast, earned earnings is definitely the earnings an organization gets for merchandise and services sold for the public by the nonprofit organization. When an organization receives this sort of earnings, the individual or entity from which the earnings is received expects to get anything of worth in return. An instance of earned earnings might possibly be a fee to get a summer time camp for underprivileged youngsters. Or, one other instance might possibly be the promoting of adaptive devices to disabled men and women (for organizations who benefit the groups getting serviced).