Unrelated Business Income Tax

Unrelated Business Income consists of income generated by the University from activities that are not related to the exempt mission of the University. Income from an activity is considered unrelated if all of the conditions listed below are met: MUST MEET ALL THREE CRITERIAS!

1. The activity is conducted as a trade or business
   What is a trade or business?
   An activity is considered to be conducted as a trade or business if its primary purpose is to generate a profit for the sale of goods or service.
2. Regularly carried on
   What does it mean to be regularly carried on?
   UBIT applies only to activities that are regularly carried on, as opposed to activities that are sporadic or infrequent. An activity is considered regularly carried on if it is conducted with a frequency comparable to the conduct of a similar activity in the private sector.
3. Not substantially related to the exempt mission of the University
   
   How is an activity characterized as not being substantially related to WSU’s exempt purpose?
   WSU’s exempt purposes are education and research, so an activity whose purpose is not substantially related to one of those purposes would be characterized as unrelated. It is irrelevant that the proceeds from an activity are used to fund education or research. The determining factor is the nature of the activity itself. Determining whether or not the income from an activity is taxable can be difficult. The tax code has many exceptions and rules that are too extensive to include here. We will provide you with the basic principles but encourage you to call our office and discuss your situation with us. Please call (509) 335-2022, and speak with Robert Wright.

To request a copy of the 990-T please contact Robert Wright, General Accounting. Phone: (509) 335-2024 wrightrd@wsu.edu

Yes! A partial list of activities not subject to UBIT includes but is not limited to:

• Dividends, interest, capital gains and similar portfolio income
• Royalties
• Rents from real estate
• Research
• Business operated for the convenience of students or employees
• Corporate Sponsorships, if properly structured
• Substantially all work performed without compensation (volunteer)
• Merchandise sold was originally received by university as gift or contribution
• Research activity
• Computer time sold to university departments
• Meetings, conferences and seminars where education or training is provided by WSU. However, tangible personal property provided as part of the meeting packages can be unrelated (i.e. audio/visual equipment)
• Sponsoring entertainment events for the appearance of professional theater companies and symphony orchestras that present drama and musical performances for students, faculty, and the general public.

• Golf Course — Golf Course Food Service
• Partnerships
• Alumni Association Travel Tours
• Computer Laboratory
• Special Events (rock concerts, etc.)
• Summer Conferences
• Television Production Services
• Concessions
• Game Program Advertising
• Corporate Sponsorships
• Computer time sold to an outside company
• Rentals of apartments or offices to the general public where the building is financed by tax exempt bonds
• Rental payments for the lease of space on antenna towers and transmission facilities
• Professional entertainment events operated in a commercial manner and not part of an educational program
• A campus fitness center memberships sold to the general public
• Dual use of assets or facilities for public events including evening hours

Both direct and indirect costs which are “proximate and primary” to the generation of the taxable income.

Activity: The University’s ballroom is periodically rented to the general public for private activities such as wedding receptions and other private events.

Trade or Business?	Yes
Regularly Carried On?	Yes
Not Substantially Related?	Yes
Exception:	Yes (Rental income from real estate)
Subject to UBIT?	No

Activity: WSU Student Recreation Center sells memberships to the general public/WSU Alumni.

Trade or Business?	Yes
Regularly Carried On?	Yes
Not Substantially Related?	Yes
Exception:	No
Subject to UBIT?	Yes