Unrelated Business Taxable Income (UBTI)

Unrelated Business Taxable Income (UBTI) refers to the income generated by a tax-exempt organization from activities that are not substantially related to its exempt purpose.

This type of income is subject to taxation under the Internal Revenue Code. Examples include income from a business that an exempt organization operates, such as a university running a commercial parking lot or a charity selling merchandise unrelated to its mission. UBTI is calculated by subtracting allowable deductions from gross income generated from these unrelated activities, and the resulting amount is subject to the Unrelated Business Income Tax (UBIT).