What is Unrelated Business Income or UBIT?

What is Unrelated Business Income or UBIT and what does it have to do with my homeschool group?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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Do you have more questions about conducting fundraisers? My book Money Management in a Homeschool Organization can help.

  • Does your homeschool group manage their money well?
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This 115 page book will help you to open a checking account, establish a budget, prevent mistakes and fraud, use software to keep the books, prepare a financial statement, and hire workers. Sample forms and examples of financial statements in clear English are provided.

Money Management in a Homeschool Organization

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