Re: Some more answers *EDIT

http://www.nolo.com/article.cfm/objectId/74A82C1D-C33C-4F12-B20CCD3B6805A03F/...

TONY MANCUSO: Well, it’s interesting, because the common meaning of profit is basically that you take in more than you spend, and you end up having a margin or a profit related to your activities -- but that isn’t really what it is meant under the nonprofit statues.

Basically, [the IRS doesn't] want you to be a commercial profit-making business; they don’t want the end that you’re trying to achieve to be the making of money. So, it’s not really in an accounting sense, it’s more of a common sense definition that has to do with your motives, your reasons for operating a nonprofit. They don’t want a substantial purpose to be simply to make money. It’s okay to make money, but they don’t want that to be your overriding interest, so it’s rather fuzzy and vague -- the standard -- but that’s really why they look very closely at your operations when you apply for tax exemption; they want to see your overall purposes of your program.

If [the IRS feels], for instance, that you’re going into a publishing business simply to sell books to make money and not for any other reason, they’ll say, “Well, you’re a profit-making business; you really don’t qualify as a 501(c)3 educational nonprofit.” On the other hand, if you’re selling books that do the public good, that are clearly focused on benefiting the public and educating them in a certain way, then you can qualify, and you can make money from your sales.