Unrelated Business Income Tax

Florida International University (“FIU”) is exempt from federal income tax under §115 of the Internal Revenue Code (“IRC”).   The IRC provides that the exempt purposes of state universities include all purposes and functions described in IRC §501(c)(3): charitable, scientific, testing for public safety, literary, educational, to foster national or international amateur sports competition, or for the prevention of cruelty to children or animals. However, FIU is not exempt from tax imposed by IRC §511 to §514 on activities which are unrelated to those exempt purposes, e.g., unrelated business income (“UBI”).

For an activity to be considered an unrelated trade or business, all of the following criteria must be satisfied:

  1. The activity must be a “trade or business;”
  2. The activity must be “regularly carried on;” and
  3. The activity must not be substantially related to any IRC §501(c)(3) exempt purpose.

Federal income tax is imposed on FIU’s unrelated business income.   This tax is referred to as unrelated business income tax (“UBIT”).  Activities that are determined to produce unrelated business income will be included in FIU’s Exempt Organization Business Income Tax Return (Form 990-T), which is prepared annually by the Tax Compliance Department of the Controller’s Office for submission to the Internal Revenue Service (“IRS”). A questionnaire is sent to all departments each year to assist in identifying potential unrelated trade or business activities.