Unrelated business income (UBI)
Unrelated business income is money a nonprofit earns from a trade or business that isn't substantially related to its exempt mission — and it's taxable, unlike mission income.
Classic examples: a museum running a public parking garage, or a university renting its stadium for concerts. Nonprofits report this income on Form 990-T and pay unrelated business income tax (UBIT) on it.
Modest UBI is normal and legal. What matters for donors is that mission-related activity, not commercial side business, remains the organization's center of gravity.
Related terms
- Form 990 — Form 990 is the annual information return that most U.S. tax-exempt organizations file with the IRS, disclosing their finances, governance and programs.
- 501(c)(3) — A 501(c)(3) is a U.S. tax-exempt organization operated for charitable, religious, educational, scientific or similar purposes, to which donations are generally tax-deductible.
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