Does your organization have unrelated business income?
Even though an organization is recognized as tax-exempt, it still may be liable for tax on its unrelated business taxable income.
The unrelated business income tax (UBIT) is not a penalty imposed on tax-exempt organizations. It is a tax designed to level the playing field when it is perceived that tax-exempt organizations are competing with commercial businesses.
An exempt organization that has $1,000 or more gross income from an unrelated business must file Form 990-T, Exempt Organization Business Income Tax Return.
The tax is generally imposed on net income from the unrelated business activity at rates applicable to corporations, ranging from 15-35 percent. To calculate the net profit, the tax-exempt organization can reduce the gross income by expenses incurred in conducting the business activity.
Any tax due with Form 990-T is generally referred to as the unrelated business income tax. For most tax-exempt organizations, an activity is an unrelated business and subject to UBIT if it meets three requirements...