Unrelated Business Income Tax

Certain organizations are exempt from federal income tax. However, pursuant to § 511 of the Internal Revenue Code (IRC), when an exempt organization conducts “unrelated trade or business,”1 the resulting income is nonetheless taxable.

Tax exempt status confers a big advantage on an organization. With tax exempt status, an organization can conduct its activities and produce income without paying any income tax. The law of Unrelated Business Taxable Income (UBTI) represents a significant limitation to the tax exemptions an organization may enjoy. However, this is an area of law that is complicated to navigate. This primer will help you understand the law of UBTI.


[1] I.R.C. § 513(a) (“The term “unrelated trade or business” means, in the case of any organization subject to the tax imposed by section 511, any trade or business the conduct of which is not substantially related… to the exercise or performance by such organization of its charitable, educational, or other purpose or function constituting the basis for its exemption under section 501.”).

Download PDF

Discover More

Related Blogs


Get blogs directly to your inbox

Sign up for the Blue J newsletter today.

Get Started

Start enjoying better, faster analysis with Blue J

Whether you have questions or are interested in booking a demo, we would love to hear from you.

By clicking “Accept All", you agree to the storing of cookies on your device to enhance site navigation, analyze site usage, and assist in our marketing efforts. See our Privacy Policy for more info.
Deny All