Although Georgia Tech is exempt from income tax on its educational and research activities, it is subject to taxation on it unrelated business taxable income (UBI). UBI activities includes all of the following characteristics:
- The activity is a trade or business
- The activity is reguarly carried on and
- The activity is not substantially related to the entity's tax exempt purpose.
Trade or business: Generally, activities carried on for the production of income include sales of goods or services with the intention of making a profit.
Regularly carried on: Although there are no hard and fast rules, generally an activity is regularly carried on if it occurs with the same type of frequency as a non-exempt organization engaged in similar activities.
Not substantially related: An activity that does not contribute substantially to education, research or the public service missions of the institution, is not substantially related. The manner in which proceeds from the activity are used does not make the activity itself substantially related.
Unrelated business activities include but are not limited to:
- Services provided to for-profit companies and the general public including
- Parking services
- Use of recreational facilities
- Equipment rentals
- Sales of products
- Lab testing services
- Other activities not directly related to the exempt purpose
Some of the common exceptions to UBI are
- Passive income including dividends, interest, capital gains and royalties
- Business activities conducted by volunteers
- Qualified sponsorship payments
- Rental of real property
- Certain sponsored research
Tax rules are complex and contain a number of exemptions and exclusions. Each activity needs to be evaluated on a case by case basis for its unique characteristics to determine if it constitutes UBI.
Each Department is responsible for identifying activities that are potentially unrelated business income. The Tax Compliance Manager will work with departments to determine if an activity results in UBI.
Contact Charles Grattan in the Georgia Tech Controller’s Office if you need assistance in determining if your department’s sales of goods or services result in UBI. email@example.com