Unrelated Business Income Tax Survey
The University Tax Compliance office is gathering information for the FY 2021 Unrelated Business Income Tax (UBIT) filing. NC State University is exempt from federal income tax as an integral part of the State of North Carolina when revenue is generated from activities that are substantially related to the University’s exempt purposes which include research and discovery, teaching and learning, and outreach and public service.
However, revenue generating activity may be subject to federal UBIT when these conditions exist:
- Activity is a trade or business
- Activity is regularly conducted, and
- Activity is not substantially related to the University’s exempt purposes
Per IRS Publication 598, assessments and correction penalties apply to UBIT returns in the same manner as other tax returns. Therefore, if an activity is retroactively found to be subject to UBIT, the home department will be responsible for providing funds to cover the corresponding tax liability, plus any applicable interest and penalties.
If a department is generating that may not be directly in line with the tax-exempt mission of the University, please fill out the survey and it will route to the Tax Compliance office for review. Departments may have multiple revenue generating projects. If this is the case, please fill out a survey for each revenue generating project and submit.
Some activities that generate Unrelated Business Income that you may not be aware of:
- Advertising Income (inducement to sale something where there is quantifiable language such as discounts or coupons applied if you mention this, 10% off)
- Certain Bookstore Operations
- Corporate Sponsorships (Mention of a sponsor is generally not considered UBIT but in some cases a contract will need to be reviewed to ensure there is no substantial return benefit arising from it)
- Professional Entertainment Events
- Use of Recreational Facilities by General Public
- Publishing Activities
- Catering events
- Treatment of Alumni
The above list is not inclusive and many revenue generating activities necessitate a deeper dive into the business plan behind the activity to determine if there is any activity. The survey is a good way for Tax Compliance to enlist the general campus aid in ensuring that the University remains compliant under Federal and State tax laws.
Please complete survey by September 15, 2021 so we can have adequate time to review.
If you have any questions, feel free to reach out to Dwaine Cook using the form below: