One of the most attractive aspects of a not-for-profit
organization is the ability to operate and produce income which is
not subject to taxation. While this is generally the rule, there
are situations where activities conducted by an organization can
generate unrelated business taxable income. This post focuses on
the definition of unrelated business income tax (UBIT) and what
activities may trigger UBIT.
In essence, UBIT is the gross income generated from
activities:
- Comprising the operation of a trade or business;
- Which are regularly carried on; and
- Are not substantially related to the performance of the
organization's exempt purpose or function.
The need of the organization to raise funds to support its
mission does not meet the definition of "substantially
related" in this case. Instead, you must look to criteria such
as whether the activity has a substantially causal relationship to
the organization's exempt purpose and whether the size and
extent
