Activities Subject to Unrelated Business Income Tax

Unrelated Business Income Tax (UBIT) applies to income that a tax-exempt organization makes from activities that are not related to its normal business activity.

To determine if an activity is subject to UBIT, the activity must be:

• A trade or business that is carried on to produce income from the sale of goods or performance of services.
• Regularly carried on. Generally, activities are considered regularly carried on if they are conducted in a manner similar to comparable commercial activities of nonexempt organizations, including seasonal activities.
• Not substantially related to the accomplishment of the organization’s exempt purpose.

Examples of unrelated business income may include:

• Advertising
• Bar and restaurant sales
• Camping income
• Inventory sales
• Lawful gambling, including some forms of bingo
• Parking income
• Partnership income
• Rental income from real estate when there is a mortgage on the property, real estate when services are provided, or personal property
• Storage income