Can a public charity purchase a for-profit school for dyslexic children at its appraised value if the public charity's charitable mission is to “provide tuition assistance to the families of children challenged by dyslexia” and “to elevate community awareness of the educational needs of the dyslexic child.” —From the Website.
I assume that you are asking whether running a school for dyslexic children is within the charitable purpose of a tuition assistance organization and, in effect, whether income from a school would be considered unrelated business income or activity that could jeopardize its exemption. I wouldn’t look to an organization’s mission statement for the answer. Mission statements tend to morph every few years when a consultant thinks they need refreshing. A charity’s actual purpose, on which exemption is granted, is in the purpose clause of its articles of incorporation and its Form 1023 application for recognition of exemption.
In some states, it is permissible to say a charity’s purpose is merely to engage exclusively in charitable activities (See Ready Reference Page: “Articles of Incorporation Establish Basic Form of Nonprofit Corporations”), which the IRS accepts and which allows the articles to be “evergreen” so that they never require changing. Not all states permit that, however, and many lawyers will spell out a single purpose even when not required. If the purpose is not in the original articles or amendments, you would have to go to the filed Form 1023. This has to be available to the public if filed after July 15, 1987.
If you still had a question, you could broaden the purpose of the organization by amending its purpose clause to include operating a school. You might need approvals from a state Attorney General and/or Department of Education to do so. It might take some time, but it should be doable. Then you would want to notify the IRS of the expansion of purpose. (They say now that they don’t have time to monitor the change of purpose information on the annual Form 990 so you would be wise to notify them with a separate letter as well as on the 990.) The IRS won’t turn down the expansion since running a nonprofit school is clearly charitable.
You could also consider having the charity buy the school and operate it separately as a business corporation. It could solicit contributions for scholarships and other support to make it at least break even as a business. Nonprofit organizations created to support local newspapers often use this approach.
Any purchase should be at fair market value, which is not a single set price and can vary within quite a range. I would hesitate to rely on a single appraisal of that value. It would be better to have two appraisals, and perhaps a third-party decider if the buyer and seller cannot agree on a final price based on the two appraisals.
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