The Nonprofit FAQ: Unrelated Business Income

Select an FAQ   (8):

Can a tax-exempt organization sell coupon books to raise money? Selling coupon books is not an exempt activity (regardless of how the funds are used) unless the books are somehow related to the organization's exempt purposes.

Can We Sell Ads in a Program Book? Sure. But there are some factors that should be considered carefully before starting down this road.

How Can We Make a Budget for the IRS Before We Start Work? Form 1023 requires a three-year projected budget. What approach should be used to prepare one?

How does the IRS treat nonprofits' gambling revenues? Many nonprofits rely on gambling activities to bring in much-needed revenue. IRS publication 3079 covers related taxes and other issues in detail.

How is Unrelated Business Income Tax (UBIT) Calculated? UBIT is based on the corporate income tax rates. The IRS and NPOs have struggled with figuring out what is 'related' and what is not.

What is a patent? trademark? copyright? Patents, trademarks and copyrights are used to protect your creations (intellectual property), whether they are tangible creations such as books or intangible processes such as programs

What is Unrelated Business Income? How is it reported? Taxed? Unrelated Business Income exists under US tax law when an exempt organization receives regular revenues from activities that are not related to its exempt purpose (unless certain further exemptions apply). A separate form (the 990-T) is used to report UBI and to calculate whether tax (UBIT) is due.

When can a NPO charge? Whether or not an organization charges for its services is not the measure of not-for-profit status.