View of Red Cedar River

MSU Controller's Office

Financial and Cost Analysis

Unrelated Business Income Tax

Frequently Asked Questions:

  1. What is UBIT?
  2. How do I determine if I am subject to UBIT?
  3. How do I get a copy of Michigan State University's Form 990-T?
  4. Are there any EXCEPTIONS?
  5. What are some examples of university activities that the IRS monitors for unrelated business income?
  6. What deductions can be used to offset taxable income?
  7. Has MSU ever been audited by the IRS for UBIT?

  1. What is UBIT?

    "Unrelated Business Income TAX" is administered at the corporate tax rate. Unrelated business taxable income means the gross income derived by an organization from any unrelated trade or business regularly carried on by it, less the deductions.

  2. How do I determine if I am subject to UBIT?

    MUST MEET ALL THREE CRITERIA'S!

    1. Be a trade or business
    2. Regularly carried on AND
    3. Does not contribute in an important, causal way to the accomplishment of the organization’s exempt purpose.

    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 5-5026, ext.6 and speak with Beth Powers.

  3. How do I get a copy of Michigan State University's Form 990-T?

    To request a copy of the 990-T please contact Beth Powers, Financial and Cost Analysis.

    Phone: 517-355-5026 ext 6.
    email: epowers@ctlr.msu.edu

  4. Are there any EXCEPTIONS?

    Yes! A partial list 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
    • Unique Service

  5. What are some examples of university activities that the IRS monitors for unrelated business income?

    • Golf Course --- Golf Course Food Service
    • Partnerships
    • Alumni Association Travel Tours
    • Computer Laboratory
    • Special Events (rock concerts, etc.) at Student Activity Center
    • Ice Arena
    • Indoor Tennis Facility
    • Summer Conferences
    • Television Production Services
    • Concessions
    • Game Program Advertising
    • Corporate Sponsorships

  6. What deductions can be used to offset taxable income?

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

  7. Has MSU ever been audited by the IRS for UBIT?

    • MSU has been audited 3 times
    • Audits are seldom pleasant but with proper planning and education, impact to affected departments can be minimized.

If you have any questions, please contact Beth Powers at:

e-mail:epowers@ctlr.msu.edu
phone: (517) 355-5026 ext. 6
fax: (517-355-1706