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Tax Resources | Unrelated Business Income Tax (UBIT)

  1. Overview
  2. Expenses Allocable to Unrelated Business Income
  3. Research Activities
  4. Advertising Income
  5. Sponsorship Revenue
  6. Suggested Sponsorship Language
  7. Exclusive Arrangements- Granting a corporation the exclusive right to distribute food, beverages or provide athletic apparel for example.
  8. Exploitation of Exempt Activity
  9. Royalties/ Licensing Agreements/ Passive Income
  10. Rental Income
  11. Lease of Space on Broadcasting Towers
  12. Athletic/ Recreational Facilities
  13. Bookstore Operations
  14. Entertainment Events
  15. Parking & Catering Services
  16. Travel Tours
  17. Training Seminars
  18. Convenience Exclusion
  19. Volunteer Labor and Sale of Donated Merchandise


Process Summary

Internal Revenue Service (IRS) Form 990-T is used to report unrelated business income (UBI) activities. UNF has a fiscal year end of June 30th. UNF's Form 990-T must be filed with the IRS on November 15th each year (6 months after fiscal year end). Revenue and associated expenses must be reported to the Controller's office by September 1st in order to allow time for preparation of necessary tax return forms and supporting documentation (see link to UBI Reporting Form under FORMS/ DOCUMENTS below).


An exempt organization such as the University of North Florida (UNF) is subject to tax on unrelated business income (UBI) if the income is from a trade or business which is regularly carried on by the organization and which is not substantially related to the performance by the organization of its exempt purpose or function.


According to the Florida Statutes, UNF's Mission is:

  • Teaching,
  • Research, and
  • Public service.

Any activity undertaken in support of the above mission will be exempt from UBIT. If relying on the public service argument to exclude revenues from UBIT, you must be careful to show how this activity is related to UNF's exempt purpose by documenting your particular facts and circumstances in event of an IRS audit.




Examples of activities that may result in UBI:

  1. Research Activities
  2. Advertising Income
  3. Sponsorship Payments
  4. Exclusive Arrangements (Examples: food, beverages, apparel)
  5. Exploitation of Exempt Activity
  6. Royalties/Licensing Agreements/Passive Income
  7. Rental Income
  8. Lease of Space on Broadcasting Towers
  9. Athletic/Recreational Facilities
  10. Bookstore Operations
  11. Entertainment Events
  12. Parking and Catering Services
  13. Travel Tours
  14. Convenience Exclusion
  15. Volunteer Labor and Sale of Donated Merchandise
  16. Expenses Allocable to Unrelated Business Income



Trade or Business- The term trade or business includes any activity that is carried on for the production of income from the sale of goods or the performance of services.


The primary objective of adoption of the unrelated business income tax was to eliminate a source of unfair competition by placing the unrelated business activities of certain exempt organizations upon the same tax basis as the nonexempt business endeavors with which they compete.


On the other hand, where an activity does not possess the characteristics of a trade or business, such as when an organization sends out low-cost articles incidental to the solicitation of charitable contributions, the unrelated business income tax does not apply since the organization is not in competition with taxable organizations. In general, any activity which is carried on for the production of income and which otherwise possesses the characteristics required to constitute a trade or business and is not substantially related to the performance of exempt functions presents sufficient likelihood of unfair competition and will fall within the policy of the unrelated business income tax.


Accordingly, the term "trade or business" generally includes any activity carried on for the production of income from the sale of goods or performance of services.


Regularly Carried On- Specific business activities of an exempt organization will ordinarily be deemed to be "regularly carried on" if they manifest a frequency and continuity, and are pursued in a manner, generally similar to comparable commercial activities of nonexempt organizations.


Income producing or fund raising activities lasting only a short period of time will not ordinarily be treated as regularly carried on if they recur only occasionally or sporadically.


Such activities will not be regarded as regularly carried on merely because they are conducted annually or on a recurrent basis.


The regulations provide specific examples to clarify when something will be considered regularly carried on. Where income producing activities are of a kind normally conducted by nonexempt commercial organizations on a year-round basis, the conduct of such activities by an exempt organization over a period of only a few weeks does not constitute the regular carrying on of trade or business. For example, the operation of a sandwich stand by a hospital auxiliary for only 2 weeks at a state fair would not be the regular conduct of trade or business. However, the conduct of year-round business activities for one day each week would constitute the regular carrying on of trade or business. Thus, the operation of a commercial parking lot on Saturday of each week would be the regular conduct of trade or business. Where income-producing activities are of a kind normally undertaken by nonexempt commercial organizations only on a seasonal basis, the conduct of such activities by an exempt organization during a significant portion of the season ordinarily constitutes the regular conduct of trade or business. For example, the operation of a track for horse racing for several weeks of a year would be considered the regular conduct of trade or business because it is usual to carry on such trade or business only during a particular season.


In determining whether or not intermittently conducted activities are regularly carried on, the manner of conduct of the activities must be compared with the manner in which commercial activities are normally pursued by nonexempt organizations. In general, exempt organization business activities which are engaged in only discontinuously or periodically will not be considered regularly carried on if they are conducted without the competitive and promotional efforts typical of commercial endeavors. For example, the publication of advertising in programs for sports events or music or drama performances will not ordinarily be deemed to be the regular carrying on of business. On the other hand, where the sales are not merely casual, but are systematically and consistently promoted and carried on by the organization, they will meet the requirement of regularity, thus will be taxable. Therefore in order to argue an activity is not regularly carried on for UBIT purposes, the facts and circumstances need to be evaluated to determine whether the IRS may conclude the activity is "regularly carried on."


Substantially Related- A trade or business is "related" to exempt purposes only where the conduct of the business activities has causal relationship to the achievement of exempt purposes (other than through the production of income); and it is "substantially related" only if the causal relationship is a substantial one.


Thus, for the conduct of trade or business from which a particular amount of gross income is derived to be substantially related to purposes for which exemption is granted, the production or distribution of the goods or the performance of the services from which the gross income is derived must contribute importantly to the accomplishment of those purposes. Whether activities productive of gross income contribute importantly to the accomplishment of any purpose for which an organization is granted exemption depends in each case upon the facts and circumstances involved (see UNF's mission statement).

Related Business Processes

Expenses Allocable to Unrelated Business Income

Process Summary

Expenses may be deducted from UBI to arrive at taxable income. Proper documentation of expenses must be retained for 5 years (from the date the tax return is filed) in the event of an IRS audit.


Once a method for computing taxable income has been adopted, the manner in which expense computations are allocated cannot be changed, (i.e., overhead computations, etc.) without formally filing a change in accounting method with the IRS. It is important to utilize consistent computation procedures from year to year.


To be directly connected with the carrying on of a trade or business activity, expenses, depreciation, and similar items must bear a proximate and primary relationship to the conduct of the activity. Where facilities and/or personnel are used both to carry on exempt activities and to conduct unrelated trade or business activities, expenses and similar items attributable to such facilities and/or personnel must be allocated between the two uses on a reasonable basis.


In Private Letter Ruling (PLR) 9147008, a state university owns and operates a multifunctional auditorium facility, which is located on campus and used for a number of educational activities, including class registration, intercollegiate athletic contests, and commencement activities. The university does not charge or allocate any student fees to the operation of the auditorium, and students were offered discounts to only three events during the year. During the year in question, 45 "ticket events" were held at the facility during 75 days. Those events included rock concerts, performances by professional entertainers, closed-circuit boxing matches, and professional basketball games. The university received income from ticket sales, concessions, and advertising associated with the events. The Service has ruled that the income from the 45 professional entertainment events constitutes unrelated business taxable income. The Service determined that the only criterion used by the university in the sponsorship of the events was profitability. "The emphasis on revenue maximization to the exclusion of other considerations," the Service said, "indicates that the trade or business is not operated as an integral part of the university's educational programs and that the activity, therefore, fails the substantially related test." The Service also ruled that the appropriate method of allocating the fixed expenses of the facility is a ratio based on 75 days of unrelated business use divided by the 365 days the facility was available for use. It concluded that the university's formula based on actual use was not reasonable under regulation section 1.512(a)-1(c), despite the decision in Rensselaer Polytechnic Institute v. Commissioner(see below). The Service believes that their position as argued in Rensselaer is the method of allocation that meets the "reasonableness" standard of section 1.512(a)-1(c) of the regulations.


In the case of Rensselaer Polytechnic Institute v. Comm., 53 AFTR2d 84-1167 (1984), an exempt educational organization's allocation of fixed indirect fieldhouse expenses (depreciation and overhead) on the basis of total actual use was found to be reasonable. The numerator of the fraction used was the total number of hours the fieldhouse was used for commercial events, and the denominator was the total number of hours the fieldhouse was used for all activities and events - student and commercial combined. The Service argued that the appropriate method of allocation of fixed expenses between exempt and nonexempt purposes should be based on the total available time.


Examples of deductible expenses:

  • Cost of goods sold
  • Cost of production salaries and benefits
  • Direct supplies and expenses
  • Utilities
  • Depreciation and
  • Overhead

Related Business Processes

Research Activities

Process Summary

Income from research activities (those not considered testing activities - see distinction below) and deductions connected with that research income are excluded in computing unrelated business income, if these activities are undertaken:


For the U.S. or any of its agencies or instrumentalities or for a state or a political subdivision of a state;


By a college, university, or hospital, regardless of the person for whom they are undertaken;


By an organization operated primarily for the purpose of carrying on fundamental, as distinguished from applied, research the results of which are freely available to the general public, regardless of the person for whom they are undertaken. Fundamental research does not include research carried on for the primary purpose of commercial or industrial application.


Research does not include activities of a type ordinarily carried on incident to commercial or industrial operations. Thus, "research" does not include the ordinary testing or inspection of materials or products or designing or construction of equipment, buildings, etc.


Testing is further defined as work performed by unsophisticated employees the purpose of which is to determine whether an item meets certain specs versus testing a specific hypothesis. Standard protocol is used, no intellectual questions are posed, work is routine and repetitive, and a procedure is a matter of quality control. The IRS's assumption is commercially sponsored testing undertaken to satisfy government safety or pre-marketing requirements or to assure compliance with environmental laws is "ordinary testing" incident to commercial or industrial operations rather than "scientific research in the public interest (thus will be subject to UBIT)."


Certain clinical trails may be considered testing if it is not done for the benefit of patients or it does not add to the body of scientific knowledge concerning treatment of disease through the use of particular drugs (thus will be subject to UBIT). Note that if it can be shown the activity is undertaken for the scientific education of students, in search for a cure for disease, performed in the public interest, or testing for public safety, etc. then it may be excluded from UBI. If a research project is excluded from UBI under one of the above exceptions, the information must be appropriately documented and retained for 5 years.

Related Business Processes

Advertising Income

Process Summary

The IRS sponsorship rules do not apply to:

  • The sale of advertising in exempt organization periodicals. This is defined as any payment which entitles the payor to the use or acknowledgement of the name or logo (or product lines) of the payor's trade or business in regularly scheduled and printed material, published by or on behalf of the payee organization that is not related to and primarily distributed in connection with a specific event conducted by the payee organization,
  • Payments made in connection with qualified convention and trade show activities.


The term advertising is defined as any message or other programming material that is broadcast or otherwise transmitted, published, displayed or distributed, and which promotes or markets any trade or business, or any service, facility or product.


Advertising includes messages containing:

  1. Qualitative or comparative language,
  2. Price information or other indications of savings or value,
  3. An endorsement, or an inducement to purchase, sell or use any company, service, facility or product.

A single message that contains both advertising and an acknowledgement is considered advertising.


Please note that specific rules apply to the calculation of UBI and deductions for advertising in exempt organization periodicals, and this information must be reported on Schedule J of Form 990-T. Schedule J allows certain "related costs," including readership costs and circulation costs to be deducted against net unrelated advertising income (but not below zero). If your area receives advertising income, please contact theTax Advisor in the University Controller's Officefor assistance in reporting the following information:

  • Advertising revenues and directly connected advertising expenses,
  • Circulation income and circulation expenses,
  • Readership costs, and
  • Any other costs associated with publishing the periodical

See Contact Information for Questions if you need additional assistance.

Related Business Processes

Sponsorship Revenue

Process Summary

The IRS finalized the corporate sponsorship regulations in April 2002. Treas. Reg. Sec. 1.513-4 describes circumstances when income from certain sponsorship payments received by an organization isnotsubject to UBIT.


A qualified sponsorship payment is defined as any payment of money, transfer of property, or performance of services by any person engaged in a trade or business with respect to which there is no arrangement or expectation that the person will receive any substantial return benefit. The use or acknowledgement of the payor's name, logo, or product lines is not considered a substantial return benefit.


Note: substantial return benefits include advertising, which is any payment that promotes or markets any trade or business, service, facility, or product.


A substantial return benefit is described as all the benefits provided to a sponsor or persons designated by the sponsor which, when aggregated, exceed 2% of the total amount of the sponsorship payment. Each benefit must be identified, including items such as:

  1. Advertising,
  2. Exclusive provider arrangements,
  3. Goods (free mugs, tickets, t-shirts, dinners, etc.),
  4. Use of facilities, services or other privileges, and
  5. Exclusive or nonexclusive rights to use an intangible asset (trademark, patent, logo or designation of the exempt organization.

If the value of the substantial return benefit exceeds 2% of the sponsorship payment, then only the portion, if any, of the payment that exceeds the fair market value of the substantial return benefit is a qualified sponsorship payment.


A sponsorship payment may include the following information and still be excluded from UBIT:

  1. Logos and slogans that do not contain qualitative or comparative descriptions of the payor's products, services, facilities, or company. NOTE:Logos or slogans that are an established part of a payor's identity are not considered to contain qualitative or comparative descriptions;
  2. A list of the payor's locations, telephone numbers or internet addresses, including links to the sponsor's website unless the link contains an endorsement by the university of the sponsored company's products.Note:Records must be kept to document the web page did not contain endorsements by the university that would cause the payments to be classified as advertising subject to UBIT;
  3. Value-neutral descriptions, including displays or visual depictions of the payor's product line or services.NOTE:The sponsor may display or distribute its product to the general public at the tax-exempt entity's event that it is sponsoring); and
  4. The payor's brand or trade names and product or service listings.

A non-qualified sponsorship payment may be excludable from UBIT if the agreement is structured as a royalty payment or is an activity that is not regularly carried on.

Related Business Processes

Suggested Sponsorship Language

Process Summary

The following examples help illustrate when revenue is received for a non-taxable acknowledgment, and when revenue is received for taxable advertising (subject to unrelated business income tax).


See Contact Information for Questions if you need additional assistance.



We are grateful to our sponsors: (List them). Endorsed by the UNF College of XXXXX.
XYZ Computer Company, located at 123 Fowler Avenue, is proud to sponsor the UNF College of XXXXX fundraising event. We can be reached at (904) 555-5555. Please join us in thanking our sponsor, XYZ Hair Stylist, who specializes in unusual colors and does the best work in town (Jacksonville, or anywhere else).
For your sponsorship, you will receive two tickets to the event and recognition (or acknowledgement) in all printed materials. For your sponsorship, you will receive a quarter page ad (or advertising) in the event printed materials, or in other publications.
Sponsored by UNF Bookstore, located on Campus. Please be sure to stop by 123 Fowler Avenue and shop at our sponsor's store, XYZ Computing Company.

Related Business Processes

Exclusive Arrangements

Process Summary

An arrangement that acknowledges the payor as the exclusive sponsor of an exempt organization's activity does not, by itself, result in a substantial return benefit.


For example: if in exchange for a payment, an organization announces that its event is sponsored exclusively by the payor, and does not provide any advertising or other substantial return benefit to the payor, the payor has not received a substantial return benefit (i.e., when Coke sponsors a UNF art exhibit).


However, an arrangement that limits the sale, distribution, availability,or use of competing products, services, or facilities (i.e, when the sponsorship agreement states no Pepsi may be sold at the UNF art exhibit sponsored by Coke) in connection with an exempt organization's activity,this will generally result in a substantial return benefit and the value must be aggregated with any other substantial return benefits to determine if the total benefits given to the sponsor exceed the 2% safe harbor.


Allocation of payment:

If there is an arrangement or expectation that the payor will receive a substantial return benefit with respect to any payment, then only the portion, if any, of the payment that exceeds the fair market value of the substantial return benefit (determined on the date the sponsorship arrangement is entered into) is a qualified sponsorship payment. However, if the exempt organization does not establish that the payment exceeds the fair market value of any substantial return benefit, no portion of the payment constitutes a qualified sponsorship payment.




Coke gives UNF $1,200 for a magazine advertisement and a sign on the Athletic field. Advertising normally sells for $500 per page in a regularly published Alumni magazine.


$500 is treated as advertising revenue subject to UBIT. Special reporting rules apply to periodicals that may allow publication expenses to offset advertising income - please consult the Tax Advisory in the UNF Controller's Office for additional information.


$700 may be a qualified sponsorship payment excluded from UBIT as long as the Coke Athletic field sign adheres to the corporate sponsorship requirements discussed above.

Contingent payments:

the term qualified sponsorship payment does not include any payment the amount which is contingent, by contract or otherwise, upon the level of attendance at one or more events, broadcast ratings, or other factors indicating the degree of public exposure to the sponsored activity. The fact that a payment contingent upon sponsored events or activities actually being conducted does not, by itself, cause the payment to fail to be a qualified sponsorship payment.

Related Business Processes

Exploitation of Exempt Activity

Process Summary

Exempt organizations that have gross income from an unrelated trade or business activity that exploits an exempt activity (other than advertising income) should complete Schedule I of Form 990-T. An organization may take all deductions directly connected with the gross income from the unrelated trade or business activity. In addition, any loss from the related activity can be used to offset income from the exploited exempt activity.


See Contact Information for Questions if you believe your activity may qualify for treatment as an exploited exempt activity.

Related Business Processes

Royalties/ Licensing Agreements/ Passive Income

Process Summary

Dividends, interest, and royalties are excluded in computing unrelated business income.


Income will not meet the definition of a royalty and may be classified as UBI if the exempt organization is actively involved in the sale or endorsement of the product generating the royalty income.


A royalty is defined as:


Payment for the right to use intangible property. It does not include the provision of services, such as actively marketing licensed property and providing more than minimal administrative support.


The IRS will examine the business relationship between the parties to determine whether the organization is providing services in connection with a royalty activity. If so, it would value those services and treat an appropriate portion of the royalty payment as taxable compensation for services rendered (which may be UBI).


Another issue that arises in this area is whether the purported licensee is really the exempt organization's agent. If so, the IRS ignores the stated royalty because the income-producing activities of the purported licensee are treated as performed by the organization itself (thus may be UBI).

Related Business Processes

Rental Income

Process Summary

Real property rental income is not subject to unrelated business income tax except when:


  1. Personal Property is Leased.

    To the extent personal property is leased (i.e., computer equipment, etc.) together with the real property, the rental exclusion will apply, but only if the amount of rent attributable to the personal property is incidental. If the rent attributable to personal property is:

    • Less than 10% of the total rent, the amount is treated as incidental and none of the rental payment is treated as UBI.
    • Between 10-50%, the amount of the rent attributable to the real property still qualifies for the rental exclusion but the personal property rental portion of the payment must be treated as UBI.
    • Exceeds 50% of the total rent, then none of the rent is eligible for the rental exclusion and all of the rental income must be treated as UBI.
  2. Services are Provided.

    The lessor must not provide significant services for the convenience of the occupant. The regulations define such services as maid service in the case of hotel occupancy. Other potential disqualifying services include: providing an IT Coordinator for computer problems, training users on how to use equipment, providing administrative support such as copying maps, answering phones, coordinating/providing catering and setting up tables. Services such as the provision of heat, light, cleaning of public space and collection of trash are not disqualifying services.

  3. Rent Based on Earnings or Profits

    The rent payment cannot depend in whole or in part on the income or profits of any person operating the property being rented. If it does, the rental income exclusion will not apply and the income earned will be subject to UBIT. It is permissible to base the rental payments on a fixed percentage of receipts or sales and still have the arrangement qualify for the rental exclusion.


Rental income received from the following groups outlined in A-C below for the purpose of holding training seminars and meetings is related to UNF's exempt purpose and thus not subject to UBIT, even if the personal property, services or earnings and profit rules outlined in #1-3 above are violated:

  • Students;
  • Faculty, staff and other university related use paid for with university funds;
  • Federal, state or local government or related agencies.

However, if an organization is renting space for use other than educational training seminars and meetings, please contact the tax manager in order to determine if income may be subject to UBIT.

Rental Income that may be subject to UBIT:

Real property rental income received from sources not listed in #A-C must follow the rules outlined in #1-3 above in order to exclude rental income from UBI, as renting to these groups is not related to UNF's educational mission:


Alumni, General public, For-Profit Corporations, and Personal Use by University Employees. Rental income subject to unrelated business income tax is reportable on Schedule C of Form 990-T.

Related Business Processes

Lease of Space on Broadcasting Towers

Process Summary

Broadcast towers are classified as personal property (see rental rules above), thus rental income received from lease of space on the towers to other not-for profit, governmental, and other for-profit groups will be considered unrelated business income (unless the organization is using UNF's tower space to conduct an educational activity). Expenses incurred for both exempt and non-exempt purposes may be allocated based on a ratio of number of antennas rented in unrelated activities divided by total number of antennas on the tower.

Related Business Processes

Athletic/ Recreational Facilities

Process Summary

Most universities have athletic facilities (tennis courts, gymnasiums, canoe rentals, etc.) that are used in physical education programs and college athletic events. This is related to a school's exempt purpose. Often the school allows the general public to use these facilities for a fee. Use by faculty and staff will be considered related, howeveruse by alumni and the general publicmay result in unrelated business income, unless it meets theReal Property Rental Incomeexclusion or any other exception outlined in the internal revenue code and regulations.

Related Business Processes

Bookstore Operations

Process Summary

Sales to students, faculty and other employees of items that are directly related to the school's educational purposes, such as books, records, tapes, general school supplies (notebooks, paper, pens, pencils and typewriters) and athletic wear used in the school's athletic and physical education program are generally exempt from unrelated business income tax (UBIT). Sales of non-educational items that are for the convenience of students, faculty and staff may be excluded under the "convenience exclusion" (See more information re: convenience exception on p.28 below). Sales to ALUMNI donotfall under the related or convenience exception. These sales will be subject to UBIT.


Sales of other non-educational items (stuffed animals, clothing apparel, cameras and other photographic equipment and supplies, tape recorders, radios, television sets, and small appliances) will be subject to UBIT. As a general rule, any non-educational item with a useful life of more than one year does not fall within the convenience exception and will be taxable, except for novelty items with the school logo.

Related Business Processes

Entertainment Events

Process Summary

Entertainment events conducted by a university in which the school's own students put on the event (ex: play, recital or ballet) are treated as a related activity, even if a substantial portion of the audience and revenues come from the general public. Entertainment events involving professional entertainers may result in a problem with the IRS. Examples of these events include rock concerts, tractor pulls, and string quartets. The distinguishing characteristic is not the "cultural" nature of the event (or lack thereof) but rather whether it is a professional performance involving paid performers. The IRS views these paid entertainment activities as being related only if they are "operated as an integral part of the educational program of the university, but are unrelated if operated in substantially the same manner as a commercial operation."

Related Business Processes

Parking & Catering Services

Process Summary

When sales are made to the general public or alumni, the IRS may treat the activity as unrelated to a university's exempt purpose, thus may be subject to UBIT.

Related Business Processes

Travel Tours

Process Summary

As a general rule, income from travel tours will be subject to unrelated business income tax (UBIT) unless the trips are related to the sponsoring organization's exempt purpose. Whether travel tour activities are substantially related is determined by looking at the relevant facts and circumstances, including, but not limited to how the travel tours are developed, promoted, and operated.


The University of North Florida (UNF) is an educational organization. To avoid paying UBIT, the focus of the tours it promotes should be academic, and include a substantial portion of the following factors:

  • Devoting a significant amount of time to organized study,
  • Preparation of reports,
  • Lectures,
  • Instruction,
  • Exams,
  • Use of textbooks, and/or
  • Awarding of academic credit.

If a travel tour is oriented toward attending cultural performances, sightseeing, and/or recreational destinations without an academic focus (see factors above) then income will be subject to UBIT.

Related Business Processes

Training Seminars

Process Summary

The following information is a general overview of unrelated business income tax (UBIT) rules as applied to Training Seminars.


When holding seminars on UNF campus, if a seminar is related to UNF's exempt purpose (teaching, research, or public service), then income from the seminar will not be subject to UBIT.


To be exempt from tax under the teaching provision, revenues must be earned from training activities furthering the university's exempt educational purpose. This is stronger if the seminar follows the university's course curriculum as discussed in various IRS rulings summarized below.


Conducting training courses for a for-profit company was deemed substantially related to a university's educational purpose (see fact patterns inRev. Rul. 68-504[doc]andPLR 9137002[doc]). These courses followed "the educational curriculum in place at the university, utilized professors and teaching assistants, and awarded academic credit to those who requested it." If the university passes along knowledge or the class improves the skills of the individuals, then the university most likely does not have UBIT as it is furthering its educational mission.


In PLR 9617045[doc], the IRS has taken the position there is a distinction between providing services:

  • To the public at large (not resulting in UBIT where the activity is substantially related to the organization's charitable purpose) and
  • Tailored to meet the specific needs of a for-profit entity (resulting in UBIT).

The IRS acknowledges the unrelated business income (UBI) determination is more difficult in cases where the service provided to the public at large is the same as the service provided to a private party. The IRS may consider activities benefiting a specific private party rather than the public at large as not substantially related to the organization's exempt purpose (thus may result in UBIT).

Public Service

To be exempt from tax under the public service provision, the seminar must:

  • Help another charitable class under IRC 501(c)(3) or
  • Otherwise tie into UNF's mission statement.

Since UNF is a state institution, its mission may be interpreted more broadly than the mission of the various 501(c)(3) institutions discussed in the rulings above. As a result, UNF may have more success excluding its training revenues from UBI if it is determined UNF is providing training as a public service to outside organizations in furtherance of UNF's overall public service mission.


The charitable classes mentioned in the first bullet above include:

  1. youth
  2. needy
  3. elderly
  4. infirmed

When training seminars benefit the charitable classes mentioned above, revenues may be excluded from UBIT.


A training course most likely does not result in UBIT if it was previously developed for UNF and is being offered to the general public (as UNF is helping disseminate knowledge to the general public, to better the community, in accordance with UNF's mission statement).


When UNF creates new training courses specifically tailored to the client's needs, it is not clear whether the training is related or unrelated to UNF's exempt purpose (see unrelated discussion based on PLR 9617045 above).

Related Business Processes

Convenience Exclusion

Process Summary

IRC Sec. 513(a)(2) contains an exclusion from the definition of unrelated trade or business for any trade or business that is carried on primarily for the convenience of its students or employees. In Rev. Rul. 58-194, 1958-1 CB 240, a corporation organized for the purpose of operating a book and supply store and a cafeteria and restaurant on the campus of a State university primarily for the convenience of its student body and the members of its faculty was considered to be operated exclusively for educational purposes and qualified as a 501(c)(3) organization. In Rev. Rul. 81-19, 1981-1 CB 353, a 501(c)(3) organization's (formed to assist a specific university) operation of machines that provide soft drink and food vending services on campus is not an unrelated trade or business. The organization contracted with a vending company for placement of vending machines on the campus and purchased and managed other machines itself.

Related Business Processes

Volunteer Labor and Sale of Donated Merchandise

Process Summary

Treas. Reg. Sec. 1.513-1(e) provides that unrelated business income does not include:

  1. Any trade or business in which substantially all the work in carrying on such trade or business is performed for the organization without compensation. An example would be an exempt orphanage operating a retail store and selling to the general public, where substantially all the work in carrying on such business is performed for the organization by volunteers without compensation.
  2. Any trade or business that consists of selling merchandise, substantially all of which has been received by the organization as gifts or contributions. This exception applies to "thrift shops" operated by a tax-exempt organization where those desiring to benefit such organization contribute old clothes, books, furniture, et cetera, to be sold to the general public with the proceeds going to the exempt organization.

Related Business Processes

Contact Information

Controller's Office

Name Phone Email
Nancy Viafora (904) 620-2762
Nakinya Robinson (904) 620-2788