By Grant Williams

Only about 40 percent of the nearly 14,200 charities that earned business income unrelated to their charitable missions wound up paying taxes on those earnings in the 2006 tax year, according to IRS statistics. These charities reported a collective gross income from business activities of more than $6.45-billion, yet paid just $280-million in tax.

Under federal law, nonprofit groups must pay tax on income generated from business activities that are not “substantially related” to their charitable missions.

A 2008 Chronicle study of the business practices of 91 of the nation’s largest charities found that many organizations take advantage of vague rules and specific exemptions built into statutes to legally avoid paying taxes. Fifty-one percent of the charities in the Chronicle study listed zero taxable income or a loss.

The new IRS figures are available at http://www.irs.gov/pub/irs-soi/10winbulunrelatebus.pdf.