Unrelated Business Income Tax (UBIT)
Boise State University is subject to a federal tax on income generated from activities that are unrelated to our tax-exempt purposes of education, research, and community service. Unrelated business income is reported to the Internal Revenue Service on form 990-T annually. Generally, the activities creating unrelated business income (UBIT) are profit oriented activities operated in a commercial manner. The following criteria are used to determine if the activity is subject to tax reporting:
- The activity constitutes a “trade or business,”
- The activity is “regularly carried on” by the organization, and
- The conduct of the activity is “not substantially related” to the organization’s exempt function.
Trade or Business: Includes any activity carried on for the production of income from selling goods or performing services. The activity is typically operated in a manner similar to a for-profit entity.
Regularly Carried On: A business activity that occurs on a frequent and consistent basis, as opposed to transactions that are sporadic or infrequent. An activity is considered regularly carried on if it is conducted with a frequency and manner comparable to the conduct of a similar activity by a commercial business.
Not Substantially Related: The activity is not substantially related to the University’s exempt mission of education, research and public service.
The following are examples of activities that are not related to the mission of the University and subject to unrelated business income tax:
- Advertising income
- Bookstore operations
- Commercially sponsored scientific research if the results are not made available to the public or directed toward benefiting the public
- Computer time sold to outside company.
- Equipment rental to the public.
- Facility rentals for events where services are provided.
- On-line stores
- Rental of sports facilities such as stadiums, soccer fields, etc. where services are provided.
- Sale of mailing lists or other data to commercial entities.
- Sale of merchandise (evaluated on an item-by-item basis).
- Summer Sports Camps that are not part of educational programs offered by the University.
- Travel tours that are not authentic educational activities (i.e. sightseeing, recreational, social, cruise, etc.)
- Corporate sponsorship payments where the sponsor receives a substantial return benefit.
- Commercial activities exploiting the University’s educational purpose.
- Joint ventures with for-profit organizations such as partnerships with individuals, corporations, or limited liability companies that do not serve the University’s charitable purposes and do benefit the for-profit partner and/or insiders.
- Professional entertainment events.
- Exclusive provider arrangements where the University performs substantial services.
- Direct operation of parking lots.
- Recreation center memberships sold to the general public.
- Book publishing where the University owns the rights to a book which does not relate to the educational purposes of the University.
Income received by the University that meets the initial criteria to be classified as unrelated will be reviewed to determine if other exclusions apply.
Exclusions from Unrelated Business Income
- Interest and dividends
- Rent from real property – certain limitations apply
- Sale of property
- Advertising in student newspaper when the newspaper is run by the students as part of an educational program
- Research activities – exclusive of product or drug testing and inspection of commercial products or materials
- Volunteer activities
- Sale of donated property
- Corporate sponsorships – must be structured properly
- Activities for convenience of students or employees
Departments generating income that may be subject to reporting as unrelated business income should notify the Tax Reporting department at firstname.lastname@example.org.