I have a new nonprofit that is currently a non-member nonprofit corporation. I want to apply for recognition as a 501(c)(3) private foundation but also want to have a dedicated page on my website where I can sell educational material that is related to the mission of the organization. Is that practice allowed in a private foundation?
The short answer to your question is “Yes.” Private foundations may sell goods or services as part of their activities, just as public charities may. You have said the material will be related to your mission so its sale should not produce unrelated business taxable income and should not jeopardize your exempt status.
Your question raises other issues in my mind, however. You talk about what you want to do with the corporation but have set it up as a non-member nonprofit. Have you considered a sole member corporation that would protect you if the other board members decide to go in a different direction and then try to fire you from what you thought was “your” organization? (See Ready Reference Page: “Sole Member Bylaws Can Protect Founder of Nonprofit”)
You also say you want to be classified as a private foundation, which would impose significant limitations on your activities. It would be particularly limiting if you would want to lobby for new legislation to help accomplish your mission or if you would want to have any economic relationship between yourself (or other insiders, including family members) and the organization other than reasonable compensation for services rendered to pursue the foundation’s mission. Self-dealing penalties for disqualified persons are much greater and apply to many more situations than excess benefit transactions for public charity insiders. If you intend to sell foundation-related stuff on your personal website, rather than on the foundation’s website, this alone could result in self-dealing penalties. (See Ready Reference Page: “Private Foundations Must Avoid Self-Dealing”). If you will be receiving contributions from others and significant revenue from sales of your materials on the web or elsewhere, you should seriously consider whether you can qualify as a public charity. (See Ready Reference Page: “Calculating Public Support Percentage”)
Finally, if you are not going to be a grant-making organization and will operate a direct charitable program as your primary activity, you may want to consider applying for recognition as a private operating foundation. It has a few advantages, primarily in attracting other support for the organization, including from private non-operating foundations, but still has most of the disadvantages of a private foundation. (See Ready Reference Page: “Private Operating Foundations Are Hybrids”)
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