UBIT (Unrelated Business Income)

A tax-exempt organization such as San José State University is subject to tax on unrelated business income (UBI), which is income from any trade or business that is not substantially related to its tax exempt mission. The Accounting Services department prepares a UBIT packet to report all identified UBIT activities on campus annually and submits it to the Chancellor office for filing the Exempt Organization Business Income Tax Return (IRS Form 990-T).

• For more information

  • The mission of California State University is to advance and extend knowledge, learning, culture and to offer undergraduate and graduate instruction leading to the bachelor’s and higher degrees.

    In order for the university’s income to be considered unrelated business income, it must meet all three criteria below:
    
    1.   The income is from a trade or business, with the intent of
          realizing a profit.

    2.   The trade or business is regularly carried on.

    3.   The conduct of the trade or business is not substantially related
          to the university’s tax exempt mission.

    However, even if the income meets the three criteria above to be classified as unrelated business income, there are still number of modifications, exclusions and exceptions to consider before the income is determined to be taxable. For Example, income from dividends, interest, royalties, certain rental income, certain income from research activities, gains or losses from the disposition of property are excluded when computing UBI. In addition, unrelated business income does not include income derived from the work of unpaid volunteers, income from the sale of donated goods, income generated are for  the convenience of its members, students, patients, officers, or employees. More information can be found in the IRS publication 598

    The following are examples of activities that may be not related to the exempt mission of the University and are therefore subject to unrelated business income taxation (UBIT):

    •  Advertising revenue received from a company placing an ad in an athletic or performing arts program.
      
      
    • Advertising revenue received from advertising on the Internet that goes beyond mere acknowledgement of sponsorship.
      
      
    • Alumni and public use of recreation center.
      
      
    • Hyperlink to a sponsor’s website where an endorsement appears for the sponsor’s product.
      
      
    • Professional entertainment events operated in a commercial manner and not part of an educational program.
      
      
    • Rental of campus facilities to professional sports teams.
      
      
    • Rental of laboratory facility to non-university users.
      
      
    • Rental of recreation equipment to the general public and alumni.
      
      
    • Rental of sports facilities such as stadiums, soccer fields, etc. where services are provided.
      
      
    • Dormitory rentals to the public.
      
      
    • Parking revenue from private companies or contract arrangements.
      
      
    • Sale of advertising space in periodicals, telephone directory, or yearbook.
      
      
    • Sale of art objects at exhibits.
      
      
    • Sale of audio-visual services to non-university users.
      
      
    • Sale of computer or programming services to non-university users.
      
      
    • Sale of printing services to non-university users.
      
      
    • Sales of equipment to non-university users.
      
      
    • Travel tour programs that are not authentic educational activities (i.e. sightseeing, recreational, social, cruise, etc.)
      
      

    If your department generates revenues from any of the above activities, please send your inquiries to the campus' tax specialist at
    nrat-ubit@sjsu.edu for further UBIT determination. It is very important that all unrelated business income of the University be reported on the Federal tax return to avoid any costly penalties and interest assessed by the IRS.