Unrelated Business Taxable Income (UBTI)

Unrelated Business Taxable Income (UBTI) is the amount of income that a tax-exempt organization earns from activities that are not related to its exempt purpose. UBTI is subject to federal income tax, just like the income of any other business.

There are a few key things to keep in mind when it comes to UBTI. First, not all income earned by a tax-exempt organization is considered UBTI. For example, interest income from investments is generally not considered UBTI, as long as the investments are held for the purpose of furthering the organization's exempt purpose.

Second, UBTI is only taxed at the corporate level. This means that if a tax-exempt organization has UBTI, it will not be taxed on its members' or donors' personal income.

Third, there are a number of exceptions to the rules that define UBTI. For example, some types of income that are normally considered UBTI may be exempt if they are derived from activities that are substantially related to the organization's exempt purpose.

If you are a tax-exempt organization, it is important to understand the rules that apply to UBTI. By understanding these rules, you can help to ensure that your organization is in compliance with the law.