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Can a Nonprofit Charge Fees for Its Services?

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Question: Can a Nonprofit Charge Fees for Its Services?

Answer:

Yes, many nonprofits count on fees from services they offer to clients for part of their annual incomes. There are several things to be aware of:

  • The activity generating the fee must be associated with your organization's mission. If it is not, you may be subject to the Unrelated Business Income Tax or UBIT.
  • The fee must be less than a for-profit business would charge for the same or a similar service.

Rather than charge a fee, some nonprofits have "voluntary" donations. This is when you suggest that a user or client can help you provide services by giving a donation.

Be careful that you do not coerce or shame anyone into making a donation. It has to be voluntary.

One way to do this is to post a fee schedule that provides information such as how much your service actually costs to provide, and inviting users to donate an amount of their choosing. Give ranges to make it easier such as $25-$50 dollars.

There is some evidence that people, even when financially challenged, like to donate something rather than to receive just a "handout." Whether you invite donations from clients and users will depend greatly on the nature of your organization and the service you provide. A soup kitchen that provides food to the homeless is not a very appropriate place to ask for donations.

Back to FAQ's About Starting a Nonprofit Organization

 

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