Posts Tagged ‘unrelated trade’

There are few topics that generate more confusion to nonprofit managers than unrelated business income (UBI).  It is also one the areas than can cause the most problems for your organization.  It can cost you money…even your tax exempt status if not properly handled.  In this issue of our newsletter, we will shed some needed light on the subject.

The technical definition of UBI is: Income from a trade or business that is regularly carried on by an exempt organization and that is 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. Clear?  Not really.  A better way to say it is:  money generated from any on-going activity of your organization when the activity itself does not directly further the organization’s exempt purpose.  Examples are helpful:

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