How to determine if a nonprofit’s activity can be taxed under UBI rules

Clubs and Organizations

July 13, 2017

Organizations granted exempt status under IRC section 501 are typically excluded from paying federal income tax. However, there are situations in which an exempt organization could incur an income tax liability. Unrelated business income tax (UBIT) is the most common tax law affecting nonprofit organizations. Unrelated business income tax is imposed on an exempt organization based on certain unrelated business income.