The Nonprofit FAQ

When can a NPO charge?

Someone asked in soc.org.nonprofit: Can my theater group lose its non-profit status by charging schools when we perform there? Another reader of the newsgroup answered: Whether or not an organization charges for its services is not the measure of not-for-profit status. Many theater groups (the one mentioned, for example) are non-profit, AND charge admission. So do museums, and even colleges (!). The issue is what happens to the revenues: if they are used for the exempt purpose (for example, to support the work of the theater group), then the non-profit status is protected. If, however, the net revenues go to the personal benefit of individuals (excepting salaries and other reasonable compensation for services provided), then the organization is not functioning in a non-profit context. It would certainly seem that providing theater programs for school audiences is a purpose compatible with the non-profit purposes of the organizaiton (and one assumes its tax exempt purposes as well). Receiving a payment from the school (or the students) for the performance does not, by itself, jeopardize the NFP status. Jane Garthson adds: Charging a fee is quite common in non-profit organizations. Fees can even exceed direct costs of a service provided the balance goes to fund other activities of the non-profit. All of the funds you raise, by whatever means, must be used to further the objectives you set out in your incorporation papers. In other words, none can be paid out as dividends, individual profit, etc. Board members in particular must not profit in any way from the organization. Often services cannot be provided for a reasonable fee; that is, a fee the intended consumers can afford. That's why most charities seek out grants and do other forms of fund-raising. Perhaps you should talk to some schools about whether they would be willing to pay a fee and how much. If many of the schools are inner city ones with little money to spare, you could instead have a "suggested donation" amount. To get the other money you need, hold an "opening night" preview in which wealthier members of the community are asked to pay a relatively high ticket price (part of it might be eligible for a tax donation) for a chance to, say, attend a party afterwards with the cast. Some local companies might even pay to advertise in the program, or donate the food for the party in return for recognition in the program. Of course, you'll have to find one willing to pay for the program printing; successful charities are the ones who never, ever pay for anything like that directly. Very early FAQ item