Central Michigan University reports taxable Unrelated Business Income as required by the Internal Revenue Service Code and Regulations. The university expects every operating unit to comply with the Internal Revenue Code and Regulations concerning taxable Unrelated Business Income. The purpose of this update is to provide a summary of information on taxable income to the university.
The university is exempt from the payment of income taxes on income related to its exempt purposes. However, the university is liable for taxes on unrelated business income (UBI). Income from an activity carried on by an exempt organization is subject to the UBI tax if the following three criteria are present:
1. The activity constitutes a “trade or business.”
2. The activity is “regularly carried on” by the organization.
3. The conduct of the activity is “not substantially related” to the performance of the university’s exempt function.
The IRS anticipates that exempt organizations will engage in activities that may be in competition with private business endeavors. To be nontaxable, the activities must be substantially related to the purpose for which the organization has an exemption status. Therefore, the university derives taxable income from an activity if that activity is not related to its educational, scientific, literary, charitable and patient care purposes.
Examples of Potential Unrelated Business Revenue
- Sale of computers and computer services to non-university users
- Sale of programming services to non-university users.
- Sale of advertising in performance programs (football, music, drama.)
- Rental of recreation equipment to the general public.
- Sale of recreation membership cards (swimming, exercise machine usage, etc.) to the general public.
- Sale of routine analytical services to non-university users.
- Rental of laboratory facility, with services, to non-university users.
- Rental of scientific instruments to non-university users.
- Provision of services for the lessee, or use of personal property, in connection with rental of real property.
- Rental of lodging, meeting rooms, or student housing to non-university users.
- Rental of office space, with services, to non-university users.
- Catering (food service, etc.) to non-university users.
- Mail order catalog sales to non-university affiliated people.
- Sale of audio-visual services to non-university users.
- Sale of printing services to non-university users.
- Sale of translation services to non-university users.
- Rental of campus facilities, with services, to professional sports teams and/or commercial enterprises.
- Rental of image analysis equipment to non-university users.
- Sale of testing services to non-university users.
- Sale of Pharmacy items (both prescription and non-prescription) to non-university users.
- Sale of child care services to non-university users.
- Sale of membership lists to commercial organizations.
Call Accounting Services at 3707 for information or assistance in determining if you may have an activity that is subject to UBI.
For more information, go to Unrelated Business Income Tax Details under Policies and Guidelines.