It's called the Unrelated Business Income Tax. In general, a profit-making business can't be shielded from income taxation just because it's owned by a charitable organization.
This being the Tax Code, there are of course complexities, but here's the gist of it, from the linked Wikipedia article:
For most organizations, a business activity generates unrelated business income subject to taxation if:[1][2]
1.It is a trade or business,
2.It is regularly carried on, and
3.It is not substantially related to furthering the exempt purpose of the organization.
A trade or business includes the selling of goods or services with the intention of having a profit.[3] An activity is regularly carried on if it occurs with a frequency and continuity, similar to what a commercial entity would do if it performed the same activity.[4] An activity is substantially related to furthering the exempt purpose of the organization if the activity contributes importantly to accomplishing the organization's purpose, other than for the sake of producing the income itself.[5]
Each bracketed number is a footnote linking to an explanatory IRS publication.
Wikipedia gives this example:
A university runs a pizza parlor that sells pizza to students and non-students alike. The university is a tax-exempt organization and its pizza parlor generates unrelated business income. While the tuition and fees generated by the university are tax exempt, its income from the pizza parlor is not tax-exempt because the pizza parlor is unrelated to the university's education purpose.
The same would apply to a church owning an LLC that made money.
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