Unrelated Business Income Tax in the U.S. Internal Revenue Code is the tax on unrelated business income, which comes from an activity engaged in by a tax-exempt 26 USCA 501 organization that is not related to the tax-exempt purpose of that organization. The Internal Revenue Code (or IRC) (more formally, the Internal Revenue Code of 1986, as amended) is the main body of domestic statutory tax law of the United States organized topically, including laws covering the income tax (see Income tax in the United States), payroll taxes, gift taxes, estate taxes... 501(c) is a provision of the United States Internal Revenue Code (26 U.S.C. § 501(c)), listing twenty-eight types of non-profit organizations exempt from some Federal income taxes. ...
A university runs a pizza parlor that sells pizza to students and non-students alike. The university is a tax-exempt organization and its pizza parlor generates unrelated business income. While the tuition and fees generated by the university is tax exempt, its income from the pizza parlor is not tax-exempt because the pizza parlor is unrelated to the university's education purpose.
Unrelated Business Income Defined
For most organizations, an activity is an unrelated business if it meets three requirements[1]:
It is a trade or business,
It is regularly carried on, and
It is not substantially related to furthering the exempt purpose of the organization
Tax Rate
The IRS taxes unrelated business income at the corporate tax rate. Corporate tax in the United States is a tax on the taxable income of a C corporation or an entity taxed as a C corporation. ...
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