[jchung]

@rpavuluri: If at any point you were to move forward with white labeling and selling that, I would recommend you consult a lawyer about whether the IRS would consider this unrelated business taxable income (UBTI). Too much UBTI can put your 501c3 status at risk. IANAL / IANYL / YMMV / etc.

[fanzhang]

I think generally UBTI refers to income that is actually unrelated to the good the nonprofit purports to do.

For example, Princeton a nonprofit can totally charge tuition and use it as a base of funding, and not pay taxes on that. They can even sell their students food in cafeteria and not pay income tax. [1] But they can't start a food franchise and not pay tax.

This software seems clearly within their registration statement. Now if they started selling software consulting as their major source of funding...

In any case, I agree checking with your accountant is the best.

[1] https://fms.iu.edu/tax/ubit/

[rpavuluri]

Thanks for the tips. We will definitely consult professionals for their advice.