[smsm42]

501(c)(3) status has nothing to do with operational profits. There are many entities that aren't losing money and still have 501(c)(3) status. That status just means the entity is not created to deliver profits to shareholders - like regular commercial company does - but it doesn't mean it has to burn money. It can very well have positive operational cash flow, it just can't redirect that cash flow to pay out the shareholders. I don't see how you conclude that "profits like this unrelated to their normal business" - any evidence substantiating this claim?

[geogriffin]

Well, reading the IRS guidelines on what qualifies as UBI, it seems like it might fall under that category, but I'm also not an expert, which is why I'm asking for a more qualified opinion. However, assuming it's UBI, it's pretty clear to me that having a large percentage of their income this year being UBI would be a red flag to the IRS.

[smsm42]

IRS regulations say:

1. It is trade or business - sure, it's trade as in sale, so that matches.

2. It is regularly carried on - not really, there's only one .org domain so one can't regularly sell it.

3. It is not substantially related to furthering the exempt purpose of the organization - that one would be the toughest to prove, the purpose of the organization is "to promote the open development, evolution and use of the Internet for the benefit of all people throughout the world". Of course you can think that selling .org to a particular company may not benefit the world, but surely it's just your opinion, you can't prove that it has no relation to the original mission.

Also, using taxation as a tool in policy disagreements is a really bad idea. It is tempting to say "ah, so do this bad thing so we retaliate against you by attacking your tax status" but that's not what tax status is for. If it's a non-profit, it remains a non-profit even after it does bad thing, and whether it is a non-profit or not should not depend on whether we like what they're doing. Tax status is not a form of punishment or reward, at least it shouldn't be.

[geogriffin]

> 2. It is regularly carried on - not really, there's only one .org domain so one can't regularly sell it.

You're right. I misread #2 as the inverse so misunderstood what UBI was.

> 3. It is not substantially related to furthering the exempt purpose of the organization - that one would be the toughest to prove...

Kinda a moot point given #2, but the IRS elaborates (emphasis mine), "... only when the conduct of the business activities has causal relationship to achieving exempt purposes (_other than through the production of income_)"