Unrelated Business Taxable Income (UBTI)

Unrelated Business Taxable Income (UBTI) refers to income generated by a tax-exempt organization, such as a charity or a university, that comes from activities not related to its main purpose. Generally, these organizations don’t pay taxes on most of their income, but if they earn money from unrelated sources—like a business—or activities outside their mission, that income may be taxable. UBTI is designed to level the playing field between tax-exempt organizations and for-profit businesses, ensuring that unrelated business activities are taxed similarly to regular businesses.