Unrelated Business Income Tax (UBIT)

Unrelated Business Income Tax (UBIT) is a tax imposed on certain income earned by tax-exempt organizations, like charities or nonprofits, from activities that are not related to their main charitable purpose. If these organizations engage in business operations that are similar to for-profit companies, the IRS taxes the profits from those activities to ensure they are not unfairly competing with taxable businesses. UBIT helps maintain a level playing field by ensuring nonprofits don't gain an unfair advantage through tax exemptions on income generated from unrelated commercial activities.