Unrelated Business Income Tax (UBIT)
Under Section 512(a) of the Internal Revenue Code, nonprofits are subject to tax on gross income, minus directly connected expenses, for activities that constitute an “unrelated trade or business.” The Code offers a three-pronged test for determining whether a particular activity is an “unrelated trade or business.” The activity must be (1) a trade or business that is (2) regularly carried on, and (3) isn’t substantially related to the organization’s exempt purpose. There are many exceptions to what activities qualify as “unrelated trade or business,” including exceptions for volunteer services.
- IRS Publication 598 (03/2021), Tax on Unrelated Business Income of Exempt Organizations
- Treasury Notice 2018-99 (Interim Guidance for Calculating UBIT on Transportation/Parking Benefits) and Council comments
- Treasury Notice 2018-67 (Proposed Rules for "Siloing" UBIT) and Council comments
- Letter to Congress Outlining Concerns with New UBIT Provisions - July 11, 2018
- Letter to Treasury/IRS on Implementation of New UBIT Provisions - May 16, 2018
- Council Analysis of the Tax Cuts and Jobs Act of 2017 (Public Law 115-97)