Unrelated Business Income Tax

Unrelated Business Income Tax (UBIT) is a tax imposed on charities and other tax-exempt organizations when they earn income from activities not directly related to their primary purpose. For example, if a nonprofit runs a café that competes with local businesses, the income from that café may be subject to UBIT. The intent is to ensure that tax-exempt organizations don’t gain an unfair advantage over for-profit businesses. UBIT helps maintain the integrity of the tax-exempt status by taxing unrelated business income, preventing misuse of nonprofit status for competitive business advantages.