Has your institution considered Revenue Enhancement Opportunities – such as “Sustainable Missionary Farming?”




Troas Bible College (TBC) is a private college exempt under Internal Revenue Code section 501(c)(3) and as a “school” under section 170(b)(1)(A)(ii).  They are required to file Form 990 annually.

We did an R.E.O. (Revenue Enhancement Opportunities) project with TBC in 2017 and they are embarking on a comprehensive program of “Sustainable Missionary Farming.”  As part of this R.E.O. project (Phase II) this program, TBS has:

  1. Secured a charitable gift of 33 acres of land behind their campus.
  2. Hired a “SMF” director who has developed a course of study and will begin to instruct enrolled students in the summer semester of 2018.
  3. Done a web-based comparison of their new 33 acres with sites worldwide and have identified a village in western Africa that is very similar in topography and climate that they are communicating with and have “adopted” the village, with trips planned in 2018.
  4. Worked with their local county extension agent regarding soil testing and identifying the most advantageous crops and livestock to grow on their acreage.
  5. Communicated with their adopted African village regarding the crops currently grown by the residents there.
  6. Begun to develop plans for using their crops and livestock in their food service program.
  7. Gone to the “drawing board” with plans for a farm-to-table restaurant – they plan a separate 501(c)(3) or sole-member limited liability company for this activity – where patrons might make charitable contributions rather than paying for the meals they enjoy.

TBC’s Controller calls us to ask about #7 above and whether we think there might be any tax issues with regard to the planned “Farm-to-Table Restaurant” on campus.

We respond that there is a recent tax ruling (see below) where the IRS responded adversely to a similar plan.  However, TBC may be able to use students in a hospitality program to “staff” the restaurant and make the case that the activity is related to their exempt purpose.



From Taxation of Exempts, “No Easy Sell – Unrelated Business Income Issues in Fundraising,” November/December 2017:

“In Ltr. Rul. 201702041, the IRS published its denial of recognition of Section 501(c)(3) status for a newly formed organization established to educate individuals about domestic violence and assisting victims of domestic violence. To raise funds, the organization proposed to operate two farm-to-table restaurants. The organization planned to purchase goods from local vendors, serve locally grown ingredients, and compensate “volunteers” for the work they perform at the restaurants. Customers dining at the restaurants would receive tax-deductible receipts for spending money on freshly prepared meals. The IRS found that the organization did not qualify as a charitable organization because more than an insubstantial part of its activities-specifically the operation of the two restaurants-was devoted to non-exempt purposes, and that the operation of the restaurants was an unrelated activity that was not in furtherance of the organization’s charitable and educational activities. The IRS noted, as it has on many occasions, that engaging in a trade or business to raise funds for charitable programs is not an exempt activity “merely because the profits will be used” for the program.

The ruling stated that the organization had planned to compensate the workers at the restaurant. If, instead, the organization used volunteer labor, 31 the activity may have avoided classification as an unrelated business activity. If, however, the organization did not have enough other charitable activities, the operation of the restaurants may have defeated exemption. Alternatively, if these farm-to-table dinners were conducted as occasional fundraising activities rather than the primary ongoing activity of the organization, this should have avoided treatment as an unrelated business activity, because they would not have been regularly carried on.”

Also, as stated above, an institution could establish a program/curriculum that aligns with its exempt purpose.  If correctly developed and documented, this program could be excluded from unrelated business income.



  • Every college, university, or seminary should be looking at R.E.O. (revenue enhancement opportunities).
  • There are many, many opportunities – worldwide and on the worldwide web – that can be leveraged in R.E.O. activities.
  • There have been numerous recent developments in the UBIT arena.
  • Ensure that you have knowledgeable tax counsel when planning R.E.O. projects.

Specific questions? Email Dave Moja

The information provided herein presents general information and should not be relied on as accounting, tax, or legal advice when analyzing and resolving a specific tax issue. If you have specific questions regarding a particular fact situation, please consult with competent accounting, tax, and/or legal counsel about the facts and laws that apply.

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