A tax how-to-guide for unrelated business income

An exemption from income taxation is often an organization’s greatest asset — without it, a substantial part of the organization’s revenues would be allocated to taxes, making it difficult to fund activities that support its tax-exempt mission.

But exemption does not apply to all income; sometimes, even tax-exempt organizations must pay income taxes. The key is knowing when to pay and managing that aspect of your organization so that it doesn’t affect your tax-exempt mission.

Our tax professionals daily address issues affecting all types of tax-exempt organizations. With this broad experience comes a deep understanding of both the technical and practical issues.

No question is trivial. And because it is difficult to diagnose and measure unrelated business taxable income (UBTI), we offer this Q&A guide to help with issues your organization may face.

A sampling of the questions we answer in the guide:

• Okay, I get it. Sometimes a tax-exempt organization has to pay income taxes. But how do you know when to pay?
• Why all the emphasis on UBI? Organizations have had UBI for years — why does it seem that the IRS is more focused on it now?
• If I have UBI, what expenses can I deduct against the revenue to lower my tax liability?
• We have advertising in our publications. How can we make sure we are reporting it correctly for UBI purposes?
• We rent property, and sometimes it’s excluded from taxation. When is it taxable?
• What can we do to make sure we manage our UBI appropriately?

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