Unrelated Business Income Tax (UBIT)

As stated in the U.S. Internal Revenue Code, any income derived from a business activity that is not related to the tax-exempt purpose of the organization is subject to taxation. An exempt organization must file a Form 990-T if unrelated business income exceeds $1,000.

For example, a university runs an ice-cream parlor located on campus. Due to the educational purpose of the institution, the university is tax-exempt but generates income from the ice-cream shop. While tuition is tax-free, any income derived from ice-cream shop is unrelated and is subject to taxation.

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Hypothetical example(s) are for illustrative purposes only and are not intended to represent the past or future performance of any specific investment.

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