Unrelated Business Income Tax Requirements
Unrelated Business Income Tax (UBIT) applies to income that a nonprofit and/or 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 for the production of income from the sale of goods or performance of services.
- Regularly carried on. Generally, periodic activities are not considered regularly carried on. Seasonal activities are considered regularly carried on because the activity occurs during the season when for-profit businesses conduct the same activity.
- Not substantially related to the accomplishment of the organization’s exempt purpose.
Tax-exempt organizations doing business in Minnesota that file federal tax return forms 990-T, 1120-C, 1120-H, or 1120-POL are required to file Form M4NP, Minnesota's UBIT Return, and pay tax on the Minnesota federal taxable income. (See UBIT forms and instructions.)
The UBIT rate is 9.8%.