Nonprofit Accounting Basics

Unrelated Business Income Tax (UBIT)

Note: Articles published before January 1, 2017 may be out of date. We are in the process of updating this content.

Unrelated Business Income Tax: All but a few states require income tax to be paid on net unrelated business income. Most states simply require that this be reported and paid via the state corporate income tax return; tax rates are generally the same as for regular corporations and estimated payments are required. Therefore if an organization files a Federal 990-T, it will most likely have at least one state filing requirement. Organizations which operate in more than one state need to be aware of nexis rules which may require them to apportion income to other states and to then file in these jurisdictions. Particular attention should be paid to pass-through unrelated business income being reported on K-1’s that is earned in another state. This may give rise to a filing requirement in a state in which the organization has no other nexis. Failure to file in a state over a period of time can result in heavy penalties and interest in addition to taxes.