Revenues from taxable sales activities are the fastest-growing percentage of nonprofits’ income. A recent study, however, suggests that income from such sales discourages private donations, thus significantly reducing the net gain.

“If a nonprofit thinks it’s going to earn [additional income] through taxable activities, it needs to be very careful,” said Robert Yetman, co-author of “The Effect of Nonprofits’ Taxable Activities on the Supply of Private Donations,” published last March in the...

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