Form 990T

Unrelated Business Income Requirements

Form 990-T must be filed by all tax-exempt organizations that have unrelated business income (UBI).

Unrelated business income is:

• Income generated from a trade or business that is regularly carried on, but is not related to the performance of MIT’s exempt purpose as an institution for education and research, however MIT uses the profits from this activity.
• Debt-financed income, which is usually in the form of rent, interest or royalties arising from financed properties.

Clarifying UBI

A trade or business is any activity that produces income either from the sale of goods or the performance of services. Typically the activity generates a profit or is conducted in the same manner as a for-profit business.

It should be noted that some UBI-generating activities might show a profit in one year and a loss in the next. An activity can still be considered UBI-producing even if no profit is created.

An activity is regularly carried on when the DLC conducts the activity with the same frequency or continuity and in a similar manner, as a for-profit organization would conduct a comparable activity.

MIT’s exempt purposes are education and research. Therefore, any activity whose purpose is not substantially related to either education or research would be characterized as unrelated. It is irrelevant that the proceeds from an activity are used to fund education or research. The determining factor is the nature of the activity itself.

UBIT – Unrelated Business Income Tax

The IRS requires MIT to pay tax on unrelated business income.

Tax rates for UBI range from 15 percent to 38 percent. For specific tax rate information, the UBIT tax rate schedule can also be found on page 13 of the Instructions for Form 990T.

If you think your DLC is generating UBI, contact Long Tran in the VPF.