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KBLX 102.9 FM Weekend Tip - What is UBIT (Unrelated Business Income Tax)?

What is UBIT (Unrelated Business Income Tax)?   

Nonprofit organizations are usually subject to unrelated business income tax (UBIT) on income from a trade or business which is regularly carried on and which is "unrelated" to its exempt purpose, it is critical to determine whether an activity is "related" to the organization’s exempt purpose.  

To be substantially related, the activity must "contribute importantly to the accomplishment" of the exempt purposes.   

For most Nonprofit organizations, an activity is an unrelated business (and subject to unrelated business income tax) if it meets three requirements:


  1. It is "trade or business" (go to IRS link below for definition)
  2. It is frequency and there is continuity
  3. It is "not substantially related" to furthering the Nonprofit (go to IRS link below for definition)


Exceptions;


  • Dividends
  • Interest,
  • Certain other investment income,
  • Royalties,
  • Certain rental income,
  • Certain income from research activities, and
  • Gains or losses from the disposition of property are excluded when computing unrelated business income.

In addition;

. Volunteer Labor
. School Cafeterias and similar relationships
. Selling Donated Merchandise
. Bingo 

More information on the following IRS links:



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1 Comment to KBLX 102.9 FM Weekend Tip - What is UBIT (Unrelated Business Income Tax)?:

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