What is Unrelated Business Income or UBIT?

A nonprofit group may raise a lot of money from fund raising. These fundraisers could be so successful the leaders may wonder if the homeschool group owes anything to the government in taxes. For the most part, fund raising is not considered part of your nonprofit group’s mission; it is just a means to the end. After all, your group’s mission is to encourage homeschooling, not to sell ads, pizza or other products.

The Internal Revenue Service calls the money a homeschool group or any nonprofit raises from a fundraiser “Unrelated Business Income,” meaning it is money collected in a trade or business that is not related to your primary mission (or what the IRS calls your “exempt purpose”).

Your homeschool organization could have unrelated business income if you sell:

T-shirts
candy bars
entertainment book,
candles
pizza coupons
ads on your website
ads in your yearbook

Fortunately, the IRS has several exceptions to paying the UBIT tax:

A $1,000 threshold
Volunteer efforts
Not regularly carried on
Selling donated items

One of these exceptions may apply to most homeschool organizations.

Listen as Carol explains the 4 exceptions to UBIT:

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