Attention nonprofits, are you aware of your 990-T filing requirements? It is used to report your organization’s unrelated business taxable income (UBTI or UBIT). We have the details below.

What is UBIT?

UBIT or UBTI is Unrelated Business Taxable Income. Exempt organization use Form 990T to report unrelated business income. This is income from a trade or business, regularly carried on, that is not substantially related to the charitable, educational, or other purpose that is the basis of the organization’s exemption.

When to file a 990-T?

When an exempt organization has $1,000 or more of gross income from unrelated business activities, it must file a Form 990-T. If the organization also has losses, they should also consider filing a 990-T to carry forward the losses and offset future unrelated business income. Here are a couple of the more common sources of UBIT:

• Advertising income from website, newsletter or event programs.
• Rental income from property that is debt-financed.
• Alternative investments that generate a K-1 showing an amount on line 20v or in the notes to the schedule K-1 noting UBIT. If the organization also has losses related to an investment (Schedule K-1- this can be found on box 20V or in the detail notes of the K-1) they should also consider filing a 990-T to account for the net operating losses to offset future unrelated business income. If the organization makes a foreign investment, there may be additional Foreign forms that must be completed. The detail to complete these forms can also be found in the notes of the K-1.
• If the organization makes an investment in a foreign corporation, there may be additional foreign forms that must be filed with Form 990-T.

What’s New in 2021 on Form 990-T?

• Mandatory electronic filing: Paper filings of the Form 990-T will no longer be accepted.
• Updated Format as of 2020: Each unrelated trade or business activity must be reported separately on Form 990-T, Schedule A and filed with the return.

Questions on your UBIT obligations? We can help. Also, stay tuned for part two of this series where we will discuss how UBIT factors into foreign investments.