It pays to understand the intricate “regularly carried on” tenets of the UBIT rules.


Saltwater Christian College (SCC) is a private university and exempt under I.R.C. section 501(c)(3) and section 170(b)(1)(A)(ii).   SCC conducts an annual baseball tournament lasting five days.  CC spends three months prior to the tournament selling advertising space in the program/brochure, which is distributed at the tournament.  Because the brochure is distributed only over a five-day period, the advertising for the brochure is not an unrelated business activity.  It would be considered “not regularly carried on” according to several UBIT rulings.


In National Collegiate Athletic Association v. Comm’r, 914 F. 2d147 (10th Cir. 1990), an exempt organization within the meaning of Code Section 501(c)(3) published a program for its major basketball tournament.  Advertisements, some of which were placed by national companies, made up a substantial portion of the program.  At issue in the case was whether the advertising activity was “regularly carried on” for purposes of the unrelated business income rules.  The Court determined that in determining the normal time span of the business activity, preparatory time should not be considered.  The Court held that the exempt organization’s involvement in the sale of advertising space was not sufficiently long-lasting to find that it was regularly carried on by reason of the duration of the activity.  In addition, the regulations require the consideration of whether an intermittent activity occurs so infrequently that neither its recurrence nor the manner of its conduct causes it to be regarded as a trade or business that is regularly carried on.  The Court held that the advertising in the organization’s program, which was distributed over less than a three-week span at an event occurring only once a year, was “sufficient infrequent to preclude a determining that the NCAA’s advertising business was regularly carried on.”

Bottom Line

Even though most of us would look at the facts in the case above and figure that the advertising would result in unrelated business income, there is clear precedent to the contrary. (And, at this time of year, we like to bring up the “NCAA case”!) It always pays to consult with a qualified tax advisor when you are discerning situations like this.


Specific questions? Email Dave Moja.

The information provided herein presents general information and should not be relied on as accounting, tax, or legal advice when analyzing and resolving a specific tax issue. If you have specific questions regarding a particular fact situation, please consult with competent accounting, tax, and/or legal counsel about the facts and laws that apply.