Unrelated Business Income

Unrelated Business Income (UBI) is when you make money in a way that is not related to your mission statement.

Criteria

For most organizations, an activity is an unrelated business (and subject to unrelated business income tax) if it meets three requirements:

1. It is a trade or business,
2. It is regularly carried on, and
3. It is not substantially related to furthering the exempt purpose of the organization.

Exceptions

The main exceptions to the definitions of unrelated trade or business are:

• Activities conducted substantially by volunteers. (~85%)
• Activities conducted for the convenience of members, students, patients, officers, or employees.
• Sales of donated merchandise.
• Distribution of "low-cost" articles (<$8.90).
• Convention and trade show activity.
• Bingo income.

References

• Wikipedia's Unrelated Business Income Tax
• IRS Unrelated Business Income Definition