Overview
Each fiscal year the University is required to file an Exempt Organization Business Income Tax Return (Form 990 - T) with the Internal Revenue Service reporting any unrelated business income generated by the activities of its academic and support units. The Internal Revenue Code states that "a college or university is generally deemed to have unrelated business taxable income when it realizes gross income from any regularly conducted trade or business that is not substantially related to its educational and other exempt purposes."
Definitions
A trade or business is an activity carried on to produce income from the sale of goods or the performance of services. A specific business activity will be considered to be regularly carried on if it is conducted with a frequency and manner comparable to that of the same or similar activity by a taxable organization. Not substantially related means the activity that produces the income does not contribute importantly to the exempt purpose of the University. Any business activity conducted by a college or University primarily for the convenience of its faculty, other employees, and/or students is not taxable, regardless of the nature of the activity.
Annual Review
Each year the Controller's Office reviews all areas where unrelated
business income existed or had significant potential to exist in the preceding
year. Accordingly, departments are asked to notify the Controller's Office
of any new programs that may generate revenues which fit the definition
of unrelated business income, for example:
Activities such as those above do not necessarily mean that a tax liability exists. It may be determined that the activity is not subject to unrelated business income tax, or if it is a taxable activity, the revenue may generally be offset by the expenses incurred. The Controller's Office must be notified in all cases, however, when revenue is generated by University activities, programs or services so that it can make a formal determination of taxability.