The IRA owed
unrelated business income taxes as a result.
Unrelated business income tax is calculated using regular corporation tax rates.
Tax-exempt organizations should be aware that even if they are in an overall loss position for UBTI purposes, state-level allocated UBTI may be positive in certain states, and therefore state income/franchise tax liabilities can still exist even when the federal
unrelated business income tax liability is zero.
An organization that receives $1,000 or more in gross
unrelated business income in a tax year is required to file Form 990-T, Exempt Organization Business Income Tax Return, to determine the amount of
unrelated business income tax liability.
A common type of
unrelated business income is advertising.
The Internal Revenue Service (IRS) has been reviewing state-chartered credit union activities (federal credit unions are exempt) to determine compliance with
unrelated business income tax (UBIT) requirements, but such determinations are difficult due to complicated criteria and because many credit unions file group rather than individual returns.
Then the IRS will attribute the magazine's advertising revenues to the association, resulting in
unrelated business income tax for the association.
Furthermore, EMOs with advertising revenue exhibit more cost shifting than EMOs with other types of
unrelated business income, despite (or perhaps because of) the fact that the Treasury Department has issued detailed regulations outlining an appropriate allocation of costs to advertising income.
It also covers exemption issues,
unrelated business income tax, the special rules applicable to private foundations, tax rules applicable to
unrelated business income, and the tax and reporting rules applicable to political organizations.
It is targeted to organizational executives and their tax counsel and also includes information regarding
unrelated business income taxes and IRS compliance issues.
A recent series by Herbert Snyder (1998), "When Fund-Raising is Too Innovative" in Library Administration and Management, addresses two tax areas that must be considered when developing fund-raising programs:
unrelated business income and tax-exempt status.
