Even a tax-exempt organization owes tax on income from a regularly-carried-on trade or business that isn’t substantially related to its exempt purpose.
How it works
Subtracting directly connected expenses and the $1,000 specific deduction from gross unrelated business income gives UBTI; applying the flat 21% corporate rate gives the UBIT owed.
What this does not include
This does not include the “siloing” rule requiring UBTI to be computed separately for each unrelated trade or business (so a loss in one activity generally can’t offset income in another), or state-level unrelated business income tax many states also impose.
How to use this calculator
- Enter gross unrelated business income, directly connected expenses, and the specific deduction.
Frequently asked questions
What’s a common example of unrelated business income?
A university renting out parking facilities to the general public, or a museum’s gift shop selling unrelated merchandise, are commonly cited examples of activities that can trigger UBIT.
Does earning some UBTI risk an organization’s tax-exempt status?
Generally not on its own — modest UBTI is common and expected for many exempt organizations; status risk typically arises only if unrelated activity becomes so substantial it calls into question the organization’s primary exempt purpose.
Do all 501(c)(3) organizations file a UBIT return?
Only those with $1,000 or more of gross unrelated business income must file Form 990-T; smaller amounts of UBTI generally still fall under the specific deduction anyway.
