In 1950 Congress enacted the "Unrelated Business Income Tax" (UBIT) out of concern over unfair competition between taxable businesses and nonprofits. The primary function of the UBIT is to discourage unrelated business activity by nonprofits.
Nonprofits should never let their "Unrelated Business" activity reach the point where it starts to look like a commercial business. This is happening in Marietta. The Washington County Fair Board used untaxed funds and volunteer labor to make improvements to its parking lot RV sites, which was then licensed as a commercial RV park. They have moved from providing entities for occasional fairs and events to being a year-round commercial business and still claim to be a non-profit. "Unrelated Business" income could cause the IRS to reconsider a non-profit's 501 c 3 status.
Local private RV parks have rates around $450/month and $50/night. The fairground has below market rates of $275/month and $20/night. (60 percent discount)
An organization with unrelated business income may be less likely to look for traditional funding (grants and contributions) and instead make investments in the unrelated business to generate more income. The fair board has done this with these sites and also by looking at converting an old mobile home park to RV park.
The UBIT also protects the tax base. The board disclosed they earned $28,000 in 2011 and 2012 from renting those sites. That $28,000 is not within an exempt reason for starting the non-profit.
That should have been taxed at the UBIT rate of 35 percent. That amounts to $9,800, which a private business would have paid in taxes. The non-profit does the exact same business and pays nothing.
If the fair board had to pay taxes, pay for labor, purchase property, pay property tax, pay for management and return a profit they would not be renting sites at that below market rate.
There are 88 counties in Ohio and 55 in West Virginia. Nearly all have some type of fairgrounds or recreational parks with campsites designed for those specific entities. Typically a few nights to a couple weeks. The continued conversion of these non-profits to full-time commercial campgrounds is clearly unfair to the private sector and should be restrained. It is conceivable that if enough of these non-profits continue this unfair practice it could cripple an entire business sector and strip governments of hundreds of thousands of dollars in tax revenues.