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Capital Fundraising
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Unrelated Business Income
An overview of the rules| posted 11/02/2007
Most managers of not-for-profit organizations have heard of "unrelated business income" (UBI). Some organizations take great care to avoid UBI, while others, looking for more resources, are more ready to consider new income sources and UBI. The management of an exempt organization must be alert to situations in which there is a possibility of unrelated business income. If UBI is present, care must be taken to comply with laws and reporting requirements and, when applicable, to remit taxes due on a timely basis.
Not-for-profit organizations are supported primarily from contributions and earned revenue from activities directly related to their exempt purposes. Sales of religious books, tuition at schools, and campers' fees at a camp are examples of exempt purpose revenue. This income is not subject to federal or state tax on UBI.
On the other hand, income from activities that are not directly related to fulfilling an organization's exempt purposes may be considered unrelated and subject to ...
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