scholarly journals Nonprofit Business Activity and the Unrelated Business Income Tax

10.3386/w6820 ◽  
2000 ◽  
Author(s):  
James Hines
Keyword(s):  
Income Tax ◽  
Business Activity ◽  
Business Income ◽  
Unrelated Business

In Search of Profits: Measuring Income from the Unrelated Commercial Use of a Tax-Exempt Organization's Assets

2001 ◽  
Vol 76 (2) ◽  
pp. 245-262 ◽  
Author(s):  
Richard C. Sansing
Keyword(s):  
Opportunity Cost ◽  
Income Tax ◽  
Business Activity ◽  
Financial Return ◽  
Taxable Income ◽  
Commercial Use ◽  
Tax Exempt ◽  
Business Income ◽  
Unrelated Business ◽  
The Way

Profits a tax-exempt organization earns from business activities that are not related to the organization's exempt purpose are subject to the unrelated business income tax (UBIT). This paper shows that when the taxable and tax-exempt activities are substitutes, taxable income exceeds the incremental pretax financial return from the unrelated business activity because the exempt organization cannot deduct the opportunity cost of lost exempt function revenues when computing UBIT. As a result, the exempt organization may: (1) reduce or eliminate its unrelated business activity, or (2) change the way it uses its assets for unrelated business purposes by licensing the use of its assets to an unrelated taxable organization in exchange for nontaxable royalties. The model shows that although UBIT may distort the way in which an exempt organization uses its assets, this distortion can increase social welfare.

Collegiate Athletics and the Unrelated Business Income Tax

1994 ◽  
Vol 8 (1) ◽  
pp. 36-48 ◽  
Author(s):  
Caroline Kern Craig ◽  
Karen Weisman
Keyword(s):  
Income Tax ◽  
Sport Management ◽  
Collegiate Athletics ◽  
Athletic Programs ◽  
Athletic Administrators ◽  
Court Cases ◽  
High Profile ◽  
Revenue Sources ◽  
Business Income ◽  
Unrelated Business

In recent years, many university athletic programs have turned to program and scoreboard advertisements, corporate sponsorships, and other nontraditional sources of revenue to supplement their operating budgets. As confirmed by several high-profile court cases, these nontraditional revenue sources can be subject to federal unrelated business income tax—-a consequence often overlooked by athletic administrators and those involved in sport management programs. This article discusses the unrelated business income tax and its impact on collegiate athletic programs. Court cases and Internal Revenue Service pronouncements are reviewed, where applicable. Compliance and planning issues are also briefly addressed.

Tax-Motivated Expense Shifting by Tax-Exempt Associations

2007 ◽  
Vol 29 (1) ◽  
pp. 43-60 ◽  
Author(s):  
Mary Ann Hofmann
Keyword(s):  
Regression Model ◽  
Nonprofit Organizations ◽  
Income Tax ◽  
Estimation Model ◽  
Agricultural Associations ◽  
Tax Exempt ◽  
Business Income ◽  
Unrelated Business

Tax-exempt organizations are subject to the Unrelated Business Income Tax (UBIT) on the profits of business activities unrelated to their exempt mission. This study extends recent research on the expense allocations of charitable nonprofit organizations by examining a group of noncharitable nonprofits—primarily trade, labor, and agricultural associations—that differ from charitable nonprofits on a number of dimensions. The paper tests for tax-motivated expense shifting by associations. Data is obtained from the IRS Statistics of Income Division, and is supplemented by data requested from associations. Reported unrelated business expenses are compared to those predicted by a regression model to estimate expense shifting. Associations are estimated to shift approximately 20–21 percent of the expenses reported on their UBIT returns. Further analysis calls into question the validity of the estimation model, and suggests that expense shifting may be understated in this and previous studies.

The Unrelated Business Income Tax Recreational Sports

1996 ◽  
Vol 21 (1) ◽  
pp. 18-21
Author(s):  
Paul R. Milton ◽  
David M. Young
Keyword(s):  
Income Tax ◽  
Recreational Sports ◽  
Business Income ◽  
Unrelated Business

scholarly journals The Use of Offshore Blocker Corporations by U.S. Nonprofits: Should Blockers Be Blocked?

2015 ◽  
Vol 6 (3) ◽  
pp. 353-370
Author(s):  
Norman I. Silber ◽  
John C. Wei
Keyword(s):  
Income Tax ◽  
Reporting Requirements ◽  
Business Income ◽  
Unrelated Business

AbstractMany U.S. nonprofits use offshore blocker corporations to avoid paying the debt-financed unrelated business income tax (UBIT). Some lawmakers and commentators, however, criticize the practice as abusive. This article takes a closer look at the issue. It concludes that the use of offshore blocker corporations does not undermine the main purposes of the debt-financed UBIT, but that the practice nevertheless raises some serious policy concerns. The article thus recommends that Congress reform this tax: either by eliminating the blocker corporation workaround to the debt-financed UBIT or, alternatively, by repealing the debt-financed UBIT completely but leaving in place or even expanding the debt-financed UBIT’s reporting requirements.

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