(FORTUNE Magazine) – The Internal Revenue Service and charities are slugging it out again. Nonprofit groups keep launching new money-raising ventures, like this fall's splashy fashion industry T-shirt sale that will benefit the Nina Hyde Center for Breast Cancer Research. Meanwhile, the Service aims to limit any tax breaks that can help some such organizations undercut tax-paying, for-profit businesses. The Sierra Club won the most recent round in this bout. The U.S. Tax Court spared the wildlife defenders a 40% poach the IRS wanted to take on the $400,000 annual donation generated by Sierra's affinity credit cards. Holly Schadler is a Washington lawyer who represented Sierra. Schadler says that "these innovative fund-raising techniques are increasingly the bread and butter" of nonprofits. Yet there's a fine line between fundraising and a full-blown commercial enterprise. The American Association of Retired Persons sponsors a vast array of services, including life insurance, with companies like ITT Hartford. The IRS seems to think AARP's involvement goes deeper than just collecting royalty payments for the use of its logo and mailing list. Last spring AARP paid Treasury $135 million to settle the dispute through 1993, but it could face more tax liability ahead. Taking all this a step further, the Arthritis Foundation has launched its own product line of aspirin, ibuprofen, and other analgesics. The foundation says $1 million from annual sales will support research -- but look for the IRS to try for a big dose of the cash. As tax analyst Lee A. Sheppard puts it, "Persuading arthritis sufferers to purchase a certain brand of aspirin hardly serves the organization's exempt purpose."