L3Cs: The profitable nonprofit?

L3Cs are a fairly new type of Limited Liability Corporation - an actual company that can accept money from charitable foundations because they have a social mission and profit is a secondary goal. Currently not all states legally recognize L3C's, but they are gaining momentum.

L3C's are an interesting concept, but what about helping established nonprofits that already engage in business practices that must pay taxes on any unrelated business income?

For example, the Apalachin Library near me has rented out an apartment on the second floor of the building (which used to be a farm house); an unrelated business activity gaining earnings that the library has to pay taxes on. The Tioga County Historical Society (TCHS) has a gift shop, but the items sold must be connected to the mission to the museum, namely they must have some local historical or educational significance or the income is taxed. Selling art by local artists for example would not fall under this mission; contemporary art is not really historical or educational so the museum would have to pay taxes on any profit earned from those sales.

I would like to see the government reduce (or even eliminate) taxes on nonprofit business related income; with the stipulation that that business related income doesn't exceed a certain percentage of the nonprofit's income; because essentially efforts should be going toward supporting the mission and not unrelated business activity (anyone have better suggestions to reduce mission-drift in this case?). Reducing or eliminating these taxes would encourage nonprofit organizations like the TCHS to engage in some business activity utilizing assets they already poses - but may be too hesitant to use because of legal issues. This would not only help the organization, but perhaps even reduce pressure on local government to help support the organization.

James Undercofler made an interesting blog post relating L3Cs to the Cultural Sector.