This issue marks our 100th “Tax Tips” post!  We’d like to extend our HUGE THANKS to Stacey Greene and Carol Dibble of ABHE!

Issue

As we celebrate our 100th post, how about a UBIT Refresher?

Situation

Troas Bible College (TBC) is a private college exempt under Internal Revenue Code section 501(c)(3) and section 170(b)(1)(A)(ii).  They are required to file Form 990 annually.  Their new CFO calls us and says, “I’m new to higher education – with a background in banking – and this UBI stuff seems daunting.  How can I find out more about it – and fast?”

We respond – to quote the 2014 ACT Report – that, “The UBIT rules are not complex. They are, however, very detailed. Tax administrative officials, as well as outside tax advisors, for colleges and universities, must know and understand these rules in order to report the institution’s revenues properly to avoid an underpayment of tax, with interest and penalties.”

We refer her to the following resources:

The archives of this blog – “Tax Tips for Christian Higher Education

  • UBIT: The Minimum Required Level of Knowledge – 7/5/17
  • Form 990-T: Charitable Contributions deduction – 6/22/17
  • Conferences: Conventions and Trade Show? – 5/31/17
  • Dual-Use Facility Expenses – 5/17/17
  • Corporate Sponsorships with Benefits – 11/9/16
  • Corporate Sponsorships in the “Hands” of the Sponsor – 11/2/16
  • Do You Need to do a “UBIT Assessment?” – 10/26/16
  • Domestic Production Activities Deduction – 8/17/16
  • Income from Personal Property Rentals – 8/10/16
  • Fundraising “Co-ventures” with Restaurants – 7/6/16
  • Rental of Arena to Concert Promoter = UBIT – 6/8/16
  • Lessons from a College Golf Course – 5/18/16
  • Might Hosting an NFL Training Camp Mean UBIT? – 5/4/16
  • When Advertising in a Sports Program is not UBIT – 3/23/16
  • Related or Unrelated – That is the Question! – 2/24/16
  • Providing “Services” May Result in UBIT – 2/17/16
  • Do You Participate in “Travel Tours?” – 1/6/16
  • Christmas Basketball Tourney – Sponsorships – 12/23/15
  • But What About a “Guest House?” – 11/4/15
  • A “Hotel” on Campus? – 10/28/15
  • UBIT and the Christmas Cantata – 9/30/15
  • Online Periodicals Can Present Interesting Issues – 8/12/15
  • Could Some Of Your Bookstore Sales be Taxable? – 7/22/15
  • Might Laundry Operations Result in Taxes Owed to the IRS? – 6/24/15
  • Will I Be Taxed for Summer Camp Activities on My Campus? – 6/3/15

Rules

From IRS Publication 598:

Unrelated business income. Unrelated business income is the income from a trade or business regularly conducted by an exempt organization and not substantially related to the performance by the organization of its exempt purpose or function, except that the organization uses the profits derived from this activity.

Certain trade or business activities aren’t treated as an unrelated trade or business. See Excluded Trade or Business Activities, later.

From the Form 990-T Instructions:

Who Must File 

The following entities must file Form 990-T.   Any domestic or foreign organization exempt under section 501(a) or section 529(a) if it has a gross income of $1,000 or more from a regularly conducted unrelated trade or business (see Regulations section 1.6012-2(e)). Gross income is gross receipts minus the cost of goods sold (see Regulations section 1.61-3).

Bottom Line

  • Unrelated Business Income Tax is a broad, somewhat technical, arena
  • IRS Publication 598 is a great place to start accumulating UBIT knowledge
  • Impending Tax Reform might have a profound effect on the UBIT arena
  • Colleges and Universities should be particularly aware of the rules surrounding:
    • Qualified corporate sponsorships
    • Dual-use facilities
    • Schedule K-1 allocations from “alternative investments”

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.