Rental Question - LLC Renting From Non-Profit

I believe that you have stumbled on a tax issue and that the LLC / personal / Corporate status of the renter may be irrelevant. You may want to read-up on UBIT (Unrelated Business Income Tax) federally, and then look at your state, county and local tax rules on UBIT related activities. Generally, when a nonprofit does an activity that for profit entities normally do, it attracts the same tax that a for profit draws. The exception (as for sale of trinkets) occurs when it is directly related to your exempt purpose. (I.e, the USS Iowa can sell hats and not attract a UBIT tax on any profit because (a) hats are related to the battle ship, and (b) are incidental to operations. Real estate rental magnifies everything on three fronts. (1) Landlord Tenant is clearly a for-profit activity. (2) Real estate and its exemptions are much more myopic in their effect. Local law that gives exemptions for real estate "typically" require that the exempt purpose to occur on the real estate itself. (3) Some state and local provisions give a "break" to real estate which qualifies for use by a charity. I suspect that some of the issues relating to your being a for profit include: (1) Land Lord UBIT (2) Property tax assessed on your rented property. (3) Local assessment tax on your real property, including weird little taxes like variances, and the like. What may have happened is that Landlord may have been ignorant of these extra costs, paperwork and tax, and after he became aware,,,,, he seeks to pass them on to you; and the deal you had with the nonprofit is not going to be as sweet as it was when you moved in. Remember that no alarm bells go off on "move in day" but that as your presence makes its way through the system, the feedback lands on the landlord. I generally find that nonprofits (who are aware) will charge you big for the rental because they don't need the money. NOW might be the time to look around for a better deal. It will help your landlord by enabling him to rent to a nonprofit and eliminate the UBIT, state and local tax, and you may be able to find a lease at a fraction of the cost. I am hearing that very nice high rise rent can be had for 85 cents per square foot around here, when I know for a fact that a local nonprofit was charging nearly $3 per square foot. (and remember this is high cost urban California) You might consider hiring a broker to get you the best deal, but after you discover who the bargain hunters are in your area. Please remember to designate your question's BEST ANSWER. Please remember to designate your question's BEST ANSWER. Curt Harrington Certified Tax Specialist -- State Bar of California Board of Legal Specialization Electrical-Chemical-Mechanical Patent (Intellectual Property) Attorney (562) 594-9784 http://patentax.com About Curt: http://patentax.com/curt/index.html Visit the Library: http://patentax.com/library/