Unrelated Business Income Tax Returns, 003: Financial Highlights and A Special Analysis of Nonprofit Charitable Organizations' Revenue and Taxable Income
by Margaret Riley
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onprofit charitable and other types of taxexempt organizations reported $8.4 billion of gross income from activities that were considered unrelated to their philanthropic missions for Tax Year 2003 (Filing Years 2004 and 2005). Engaging in these types of activities is permissible, but income produced from them is subject to Federal taxation and must be reported on Form 990-T, Exempt Organization Business Income Tax Return. The 36,064 Forms 990-T filed to report “unrelated business income” (UBI) for 2003 slightly exceeded the number filed for each of Tax Years 2001 and 2002, but remained below the number filed for any tax year between 1995 and 2000. For Tax Year 2003, under 4 percent of all nonprofit charitable organizations filed Forms 990-T, and UBI accounted for less than one-half of 1 percent of their total revenue. An analysis of selected sources of total revenue and UBI of these organizations is presented in the section, “Revenue and Unrelated Business Income Reported by Nonprofit Charitable Organizations.” Aggregate gross UBI of tax-exempt organizations increased by more than 8 percent over Tax Year 2002. After offsetting the $8.4 billion of total gross UBI with a nearly equal amount of total deductions, the resulting unrelated business taxable income (less deficit) for 2003 was $23.2 million. Organizations reporting positive unrelated business taxable income (UBTI) numbered 15,580, or 43 percent of all filers. UBTI reported on Form 990-T increased by over 20 percent between 2002 and 2003, totaling $780.1 million, and the associated unrelated business income tax (UBIT) rose 13 percent, to $219.9 million [1]. After adjusting UBIT with certain credits and other taxes, the resulting total tax reported on Form 990-T was $220.9 million. Figure A contains these and other statistics for selected major financial data items reported on Forms 990-T for Tax Years 2002 and 2003. Total tax takes into account the $219.9 million of unrelated business income tax, plus $0.8 million of alternative minimum tax, $3.0 million of “proxy
Margaret Riley is a statistician with the Special Studies Special Projects Section. This article was prepared under the direction of Barry W. Johnson, Chief.
Figure A
Selected Items from Forms 990-T, Exempt Organization Business Income Tax Returns, Tax Years 2002 and 2003
Item 2002 (1) Number of returns, total........................ With gross unrelated business income of $10,000 or less [1]............... With gross unrelated business income over $10,000 [1]...................... With unrelated business taxable income..................................... Without unrelated business taxable income [2]................................ Gross unrelated business income....... Total deductions [3]............................... Unrelated business taxable income (less deficit)............................ Unrelated business taxable income..... Deficit................................................... Unrelated business income tax............ Total tax.................................................. -146,191 647,246 793,438 194,074 192,747 23,204 780,149 756,944 219,949 220,916 115.9 20.5 -4.6 13.3 14.6 20,608 7,776,017 7,922,208 20,484 8,436,027 8,412,822 -0.6 8.5 6.2 14,495 15,580 7.5 21,708 23,383 7.7 13,395 12,681 -5.3 35,103 2003 (2) 36,064 Percentage change (3) 2.7
[Money amounts are in thousands of dollars]
[1] Organizations with gross unrelated business income (UBI) between $1,000 (the filing threshold) and $10,000 were not required to report itemized expenses and deductions, or to complete return schedules. Those with gross UBI over $10,000 were required to fill out a more detailed "complete" return. [2] Includes returns with deficits and returns with equal amounts of gross unrelated business income and total deductions. [3] Includes both expenses and deductions reported on Form 990-T, lines 13(B), 29, 31, and 33. Excludes cost of sales and services, which was subtracted from gross receipts from sales and services in computing gross profit from sales and services (GPSS). GPSS is a component of gross unrelated business income (upon which the filing requirement is based). Total cost of sales and services was $2.4 billion for 2002 and $2.5 billion for 2003. NOTES: Detail may not add to totals because of rounding. See the Explanation of Selected Terms section of this article for definitions of gross unrelated business income, total deductions, unrelated business taxable income (less deficit), unrelated business income tax, and total tax.
tax” on certain nondeductible lobbying and political expenditures, and $0.2 million of “other” taxes, minus $3.1 million of tax credits [2, 3]. (Detail does not equal total because of rounding.) Tax credits included the foreign tax credit ($1.1 million), general business credit ($1.4 million), credit for prior-year minimum tax ($0.1 million), and “other” credits ($0.5 million). Nonprofit charitable organizations exempt from tax under Internal Revenue Code (IRC) section 501(c)(3) were the largest group of filers. They
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Unrelated Business Income Tax Returns, 2003
accounted for 37 percent of Forms 990-T filed for 2003 and 46 percent of total tax liability [4]. Section 501(c)(6) business leagues, chambers of commerce, and real estate boards accounted for 16 percent of UBI tax forms filed and 13 percent of total tax liability. Another 16 percent of Forms 990-T were attributable to section 501(c)(7) social and recreational clubs, and they accounted for 7 percent of total tax liability. Section 501(c)(9) voluntary employees’ beneficiary associations accounted for less than 2 percent of forms filed, but over 15 percent of total tax liability. Section 408(e) traditional Individual Retirement Arrangement trusts filed 7 percent of all UBI returns, although they accounted for only 2 percent of total tax liability. Less than 1 percent of Form 990-T filers were section 401(a) pension, profit-sharing, and stock bonus plan trusts, yet they were responsible for 6 percent of total tax liability. The various types of tax-exempt organizations subject to the unrelated business income tax provisions are described by IRC section in the Appendix to this article.
Background
Definition of Unrelated Business Income Nonprofit organizations that are granted Federal tax exemption based on their mission-related purposes are allowed to generate income from unrelated business activities; however, the income from these activities is subject to taxation. Unrelated business income is produced from an activity that is both conducted on a regular basis and not directly related to an organization’s tax-exempt mission. The fact that the income may be used for furthering an organization’s exempt purposes does not alter the definition [5]. Any profits from an organization’s unrelated business activities are taxed at regular corporate or trust income tax rates [6]. There are certain exclusions to this income taxation; some examples are engaging in business activities in which substantially all of the work is performed by volunteer labor; selling merchandise that the organization received as a gift or contribution; and operating certain games of chance, as specified in the Internal Revenue Code. Form 990-T Filing Requirements Organizations that are described in IRC sections 220(e), 401(a), 408(e), 408A, 501(c)(2)-(27), 529(a), and 530(a) must file a Form 990-T if they received $1,000 or more of gross income from business
Nonprofit charitable activities that were considered unrelated to the organizations accountpurposes for which they ed for 37 percent of Forms received tax-exempt 990-T filed for Tax Year status. IRC section 501(d) religious and 003 and 46 percent of apostolic organizations, total tax liability. farmers’ cooperatives, and section 4941(a)(1) “nonexempt charitable trusts” report taxes on forms other than Form 990-T. Most tax-exempt organizations are required to file an annual Form 990, Return of Organization Exempt From Income Tax, or Form 990-EZ, Short Form Return of Organization Exempt From Income Tax (used by organizations with annual gross receipts of less than $100,000 and total end-of-year assets of less than $250,000). IRC section 501(c)(3) private foundations and certain charitable trusts file an information return on Form 990-PF, Return of Private Foundation or Section 4947(a)(1) Nonexempt Charitable Trust Treated as a Private Foundation [7]. The Form 990-T is required only for a tax year in which an organization has unrelated business income. While specific taxpayer information reported on an exempt organization’s Form 990/990-EZ or Form 990-PF “information return” can be disclosed to the public, specific taxpayer information reported on its Tax Year 2003 Form 990-T “tax return” cannot [8]. Under disclosure rules governing the release of taxpayer information, only aggregate totals from Form 990-T can be presented in this article. To report unrelated business income of $1,000 (the filing threshold) or more for Tax Year 2003, IRC section 220(e), 401(a), 408(e), 408A, and 530(a) trusts’ required reporting period was Calendar Year 2003, and the Form 990-T filing date was April 15, 2004. For all other organizations, the required reporting period was any accounting period beginning in Calendar Year 2003 (and, therefore, ending between December 2003 and November 2004, for full-year return filers). The associated required due dates for filing their Tax Year 2003 Forms 990-T generally spanned May 2004 to April 2005, but extensions of time to file beyond this period were routinely granted to many organizations. Corresponding to the required filing dates, the Tax Year 2003 study sample was drawn from Forms 990-T processed by IRS throughout Calendar Years 2004 and 2005. (See
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the “Data Sources and Limitations” section of this article for detailed information on the study sample.) Because of the various accounting periods of the organizations filing a Tax Year 2003 return, the financial activities covered in this article span the period January 2003 through November 2004, although 51 percent of Form 990-T filers had Calendar Year 2003 accounting periods. Any returns filed by organizations with gross unrelated business income (UBI) below the $1,000 filing requirement threshold were excluded from the statistics presented in this article. Some of these returns were filed inadvertently; others were filed for a specific reason, such as to report and pay proxy tax (only) or to claim a refund of tax withheld erroneously on interest or dividend payments (reported on Form 1099) because the payer did not realize that the payee was a tax-exempt organization. Organizations with gross UBI between $1,000 and $10,000 were required to report only totals for expenses and deductions (except for the “specific deduction” and “net operating loss deduction,” which all organizations reported separately). Organizations with gross UBI over $10,000 were required to report more detailed expense and deduction information. Statistical Tables At the end of this article, Tax Year 2003 statistics covering selected financial data (including gross UBI, total deductions, unrelated business taxable income (UBTI), and total income tax) are shown in Tables 1-5. Tables 6 and 7 provide data on detailed sources of UBI and deductions, respectively. Statistics shown in Table 1 are distributed by type of organization based on Internal Revenue Code sections. Tables 2, 4, 6, and 7 are distributed by size of gross UBI; Table 4 is also distributed by type of entity. Table 3 is distributed by size of UBTI, while Table 5 is distributed by unrelated business activity or industrial grouping.
Revenue and Unrelated Business Income Reported by Nonprofit Charitable Organizations
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Figure B contains Tax Year 2003 data from an estimated population of 10,064 Internal Revenue Code section 501(c)(3) nonprofit charitable organizations that filed both a Form 990/990-EZ information return and a Form 990-T tax return [9]. Estimates of section 501(c)(3) organizations shown in Figure B
are lower than the estimates of these organizations’ overall Form 990-T filings shown in Table 1 because some tax-exempt entities are required to file Form 990-T, but not Form 990/990-EZ. These entities include section 501(c)(3) private foundations, most organizations with receipts less than $25,000, most churches, and certain other types of religious organizations. About 4 percent of the 263,353 nonprofit charitable organizations filing Forms 990/990-EZ for 2003 also filed Forms 990-T. Overall, nonprofit charitable organizations filing Forms 990/990-EZ reported an aggregate $1,072.2 billion of total revenue for 2003, of which less than one-half of 1 percent, or $4.2 billion, was attributable to unrelated business income (UBI). The 10,064 organizations filing both Forms 990/990-EZ and 990-T reported $483.9 billion of total revenue, with UBI comprising close to 1 percent. When examining similar statistics for each of the asset groupings shown in Figure B, organizations are clearly distinguished by the fraction of Form 990/990-EZ filers that also file Form 990-T. Compared to the 4-percent ratio overall, only about 1 percent of nonprofit charitable organizations with assets under $100,000 filed Form 990-T, whereas 39 percent of organizations with assets of $50,000,000 or more filed Form 990-T. As an organization’s asset size increases, so does the likelihood for engaging in unrelated business activities, which results in the filing of Form 990-T. Large nonprofit charitable organizations, such as hospitals, universities, and museums, usually are financially sophisticated and operate institutions that can easily conduct ancillary activities that are a natural outgrowth of their exempt operations, yet sometimes considered unrelated to their tax-exempt missions. A typical example would a large nonprofit hospital with a medical and diagnostic laboratory offering lab testing services for a fee to physicians’ offices that are not related to the hospital’s operation. Other examples are that of a museum selling gift shop items that have no connection to its tax-exempt purposes, or a university renting out its arena to a private vendor for an amusement or recreational activity with no educational purpose. Smaller nonprofit charities often do not have equal opportunities to engage in unrelated business activities to the same extent as the larger organizations. They usually have fewer staff members and
Unrelated Business Income Tax Returns, 2003
Figure B
Selected Sources of Revenue and Income Reported on Information Returns and Tax Returns of Nonprofit Charitable Organizations, by Size of Assets, Tax Year 2003
Size of assets Item Total (1) ALL NONPROFIT CHARITABLE ORGANIZATIONS Number of Form 990/990-EZ information returns, total.... 263,353 103,336 11,808,125 3,934,568 6,453,743 -583,698 170,305 1,833,207 19,146,198 66,267 23,235,394 8,610,109 12,300,514 -7,806 184,285 2,148,292 22,715,331 25,451 19,403,000 10,036,550 7,406,941 126,809 191,362 1,641,338 19,024,515 52,393 146,304,520 76,839,877 60,193,416 580,109 1,819,884 6,871,234 140,090,433 10,934 150,100,042 98,044,847 41,718,532 1,365,329 2,628,385 6,342,949 142,257,138 4,973 721,319,581 557,119,424 101,913,621 24,307,377 18,577,542 19,401,617 666,441,249 Under $100,000 [1] (2) $100,000 under $500,000 (3) $500,000 under $1,000,000 (4) $1,000,000 under $10,000,000 (5) $10,000,000 under $50,000,000 (6) $50,000,000 or more (7)
[Money amounts are in thousands of dollars]
Total revenue........................................................................ 1,072,170,661 Program service revenue..................................................... 754,585,374 Contributions, gifts, and grants............................................. 229,986,768 Total gain (loss) from sales of assets................................... 25,788,120 Investment income [2].......................................................... 23,571,762 All other revenue.................................................................. 38,238,637 Total expenses...................................................................... 1,009,674,864 NONPROFIT CHARITABLE ORGANIZATIONS REPORTING UNRELATED BUSINESS INCOME Number.................................................................................. Percentage of all nonprofit charitable organizations.............. Form 990/990-EZ information returns: Total revenue...................................................................... Program service revenue................................................... Contributions, gifts, and grants........................................... Total gain (loss) from sales of assets................................. Investment income [2]........................................................ All other revenue................................................................ Total expenses.................................................................... Form 990-T unrelated business income tax returns: Gross unrelated business income.................................... Gross profit (less loss) from sales and services................. Advertising income............................................................. Unrelated debt-financed income........................................ All other gross income........................................................ Total deductions [3]........................................................... Unrelated business taxable income [4]............................ Unrelated business income tax......................................... 10,064 3.8 483,916,385 391,580,964 52,897,450 14,290,106 9,637,502 15,510,363 452,781,450 4,170,467 2,855,494 518,369 185,377 611,227 4,362,304 220,930 63,267
1,343 1.3 173,525 47,617 82,990 0 284 42,634 168,352 81,259 73,237 6,590 118 1,314 80,130 4,903 735
1,501 2.3 899,345 498,311 146,215 1,168 4,101 249,550 885,961 314,516 212,967 22,174 395 78,980 319,837 9,413 1,424
769 3.0 947,897 695,703 135,730 -8,182 6,067 118,579 1,135,199 21,651 10,548 7,262 2,329 1,512 21,951 2,249 408
3,123 6.0 12,047,371 6,408,019 4,218,510 55,215 113,604 1,252,023 11,682,781 343,827 152,134 82,311 50,604 58,778 369,611 19,855 4,129
1,386 12.7 27,081,661 18,894,300 5,652,440 265,634 303,240 1,966,047 26,270,622 526,568 250,757 154,087 44,316 77,408 559,131 36,026 10,619
1,943 39.1 442,766,586 365,037,016 42,661,565 13,976,271 9,210,207 11,881,527 412,638,534 2,882,647 2,155,852 245,944 87,616 393,235 3,011,643 148,485 45,952
[1] Includes returns with zero assets or assets not reported. [2] Includes "interest on savings and other cash investments," "dividends and interest from securities," and "other investment income" from Form 990, and "investment income" from Form 990-EZ. [3] Includes both expenses and deductions reported on Form 990-T, lines 13(B), 29, 31, and 33. Detailed expenses and deductions data are not presented in this figure because organizations with gross unrelated business income of $10,000 or less are not required to report itemized deductions on Form 990-T. [4] Includes data from returns with positive amounts of unrelated business taxable income only. NOTES: Data are from Forms 990, 990-EZ, and 990-T for nonprofit charitable organizations that are tax-exempt under Internal Revenue Code section 501(c)(3) and exclude private foundations, most organizations with receipts less than $25,000, most churches, and certain other types of religious organizations. Detail may not add to totals because of rounding.
conduct charitable programs that do not easily lend themselves to ancillary activities that could generate unrelated business income. Another factor attributable to the low UBI tax return filing rate is that the gross UBI of smaller charities is more likely to fall below the $1,000 threshold for filing Form 990-T. It is notable, however, that while less than 2 percent of the 169,603 smaller nonprofit charitable organizations (those with assets below $500,000) filed a Form 990-T, those that did file the tax form reported aggre-
gate gross UBI that was 37 percent of total revenue reported on their Form 990/990-EZ returns. Over 39 percent of the 4,973 largest organizations, those with assets of $50,000,000 or more, filed Forms 990-T, but the gross UBI of these Form 990-T filers was only 1 percent of their total revenue. Still, these largest organizations accounted for nearly 70 percent of all gross UBI reported on Forms 990-T filed by nonprofit charitable organizations for 2003. Between 3 percent and 13 percent of the 88,778 organizations
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92
with assets of $500,000 under $50,000,000 filed Forms 990-T. Their respective gross UBI-to-total revenue ratios were between 2 percent and 3 percent. The selected Form 990/990-EZ revenue items and Form 990-T unrelated business income items shown in Figure B are the largest sources based on aggregate amounts reported by all filers. The composition of total revenue and gross UBI differs substantially within each asset-size grouping. For example, program service revenue accounted for 70 percent of total revenue on Forms 990/990-EZ overall, but its proportionate share of revenue increased incrementally, from 33 percent to 77 percent, as size of assets increased. On the whole, nonprofit charitable organizations received 22 percent of their revenue from contributions, gifts, and grants, but the percentage varied, from 14 percent for the largest organizations to 55 percent for the smallest. The largest organizations reported gain (loss) from sales of assets and investment income as their third and fourth largest aggregate sources of revenue, together accounting for 6 percent of their total revenue and 87 percent of the total amount of these two revenue items reported by all Form 990/990-EZ filers. The 10,064 nonprofit charitable organizations filing UBI tax returns accounted for 45 percent of total revenue, 52 percent of program service revenue, and 23 percent of revenue from contributions, gifts, and grants reported by all nonprofit charitable organizations. Combined revenue from program services and contributions, gifts, and grants comprised 92 percent of total revenue reported by these UBI tax return filers, the same percentage applicable to the population of nonprofit charitable organizations. However, when each of these two main revenue sources is analyzed separately, the proportions they contribute to total revenue vary when comparing all nonprofit charitable organizations to those that reported UBI on Form 990-T. The Form 990-T filers reported 81 percent of total revenue from program services and 11 percent of total revenue from contributions, gifts, and grants, while nonprofit charitable organizations as a whole reported 70 percent and 22 percent, respectively, from these sources. For the 91,718 nonprofit charitable organizations with assets of $100,000 under $1,000,000, the differences are the most striking. Within this asset-size grouping, organizations that generated UBI reported program ser-
vice revenue and contributions, gifts, and grants that were a respective 65 percent and 15 percent of their total revenue, compared to respective proportions of 44 percent and 46 percent for all organizations of that size. Typically, nonprofit charitable organizations engaging in unrelated business activities report a sizable portion of their UBI as program service revenue on Form 990/990-EZ. Nearly 70 percent of nonprofit charitable organizations’ gross UBI reported on Form 990-T was attributable to gross profit (less loss) from sales and services. Organizations that had assets under $100,000 relied heavily on sales and services to generate UBI, with aggregate profit from sales and services accounting for 90 percent of their unrelated business income. Organizations with assets of $100,000 under $500,000 and those with assets of $50 million or more also generated large proportions of gross UBI from sales and services, 68 percent and 75 percent, respectively. Profits from sales and services accounted for smaller shares of UBI for the three classes having combined assets of $500,000 under $50,000,000, varying from 44 percent to 49 percent. Organizations within these midsize classes also reported aggregate advertising income that ranged from 24 percent to 34 percent of total revenue, compared to only 7 percent to 9 percent for organizations of smaller and larger asset sizes. The data in Figure B make it clear that it is important to analyze UBI of nonprofit charitable organizations within the context of the asset size of the organization conducting unrelated business activities. The proportion of total revenue that nonprofit charitable organizations, as a whole, generate from unrelated business activities appears to be insignificant, but that is hardly the case for small asset-size organizations that engage in these activities. While the largest organizations generate a very small percentage of revenue from unrelated business activities, a significant number, nearly 40 percent, engage in these activities to some extent.
Primary Unrelated Business Activities of Nonprofit Charitable Organizations
Figure C presents the primary unrelated business activities (PUBAs) in which nonprofit charitable organizations were most frequently engaged during Tax Year 2003. The activities are listed in descending order of frequency reported by all organizations, as a
Unrelated Business Income Tax Returns, 2003
Figure C
Most Frequently Reported Primary Unrelated Business Activities of All Nonprofit Charitable Organizations Filing Forms 990/990-EZ and 990-T, by Size of Assets, Tax Year 2003
[Money amounts are in thousands of dollars]
Size of Assets All organizations Primary unrelated business activity [1] Number of returns (1) Number of returns, total...................................... Advertising and related services.......................... Lessors of real estate [3]...................................... Gambling industries............................................. Gift shops............................................................. Medical and diagnostic laboratories..................... Caterers............................................................... Unrelated debt-financed activities, other than rental of real estate [4]...................... All other primary activities.................................... 10,064 2,121 1,799 738 517 446 310 228 3,905 Percentage of returns (2) 100.0 21.1 17.9 7.3 5.1 4.4 3.1 2.3 38.8 Under $500,000 [2] Number of returns (3) 2,843 948 237 553 237 0 79 79 710 Percentage of returns (4) 100.0 33.3 8.3 19.5 8.3 0.0 2.8 2.8 25.0 $500,000 under $50,000,000 Number of returns (5) 5,278 1,039 1,414 184 212 60 162 99 2,108 Percentage of returns (6) 100.0 19.7 26.8 3.5 4.0 1.1 3.1 1.9 39.9 $50,000,000 or more Number of returns (7) 1,943 134 148 0 68 386 69 50 1,088 Percentage of returns (8) 100.0 6.9 7.6 0.0 3.5 19.9 3.6 2.6 56.0
[1] Based on taxpayer-reported primary unrelated business activity codes selected from a list included in the Form 990-T instructions. The list contained 122 North American Classification System industry codes and five additional categories that reflected certain provisions of the Internal Revenue code pertaining to exempt organizations. [2] Includes returns with zero assets or assets not reported. [3] Includes lessors of residential buildings, nonresidential buildings, and other real esatate property. [4] See the Explanation of Selected Terms section of this article for a definition of Unrelated Debt-Financed Income. NOTES: Data are from Forms 990, 990-EZ, and 990-T for nonprofit charitable organizations that are tax-exempt under Internal Revenue Code section 501(c)(3) and exclude private foundations, most organizations with receipts less than $25,000, most churches, and certain other types of religious organizations. Detail may not add to totals because of rounding.
whole [10]. The order changes when these organizations are grouped by asset size. Nearly 40 percent of all charities reported either advertising or a form of leasing of real estate as their primary unrelated business activity. Gambling industries was the third most frequently reported PUBA of all charities, but 75 percent of these charities were small organizations, having assets under $500,000. The PUBAs reported most often by organizations with assets under $500,000 were advertising and related services (33 percent of small organizations), gambling industries (20 percent), gift shops (8 percent), and lessors of real estate (8 percent). For organizations within the three midsize classes, those holding assets of $500,000 under $50,000,000, the PUBAs reported with the greatest frequencies were lessors of real estate (27 percent of midsize organizations), advertising and related services (20 percent), gift shops (4 percent), and gambling industries (4 percent). The most frequently reported PUBAs of organizations with assets of $50,000,000 or more were medical and diagnostic laboratories (20 percent of large organizations), lessors of real estate (8 percent), advertising and related services (7 percent), pharmacies and drug stores (5 percent), caterers (4 percent), and gift shops (4 percent). The activity of
pharmacies and drug stores is not shown in Figure C because this was not a top-ranked PUBA of nonprofit charitable organizations overall.
Summary
During 2004 and 2005, tax-exempt organizations filed an estimated 36,064 Forms 990-T, Exempt Organization Business Income Tax Return, for Tax Year 2003, ending a 4-year decline in annual Form 990-T filings. After offsetting $8.4 billion of total gross unrelated business income (UBI) with a nearly equal amount of total deductions, the resulting unrelated business taxable income (less deficit) for 2003 was $23.2 million. Positive unrelated business taxable income reported on Form 990-T increased by over 20 percent between Tax Years 2002 and 2003, totaling $780.1 million, and the associated unrelated business income tax (UBIT) rose 13 percent, to $219.9 million. After adjusting UBIT with certain credits and other taxes, the resulting total tax reported on Form 990-T was $220.9 million. These and other major financial data items from Form 990-T are presented in Figure A. For Tax Year 2003, under 4 percent of the 263,353 Internal Revenue Code section 501(c)(3) nonprofit charitable organizations filing Forms
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Unrelated Business Income Tax Returns, 2003
990/990-EZ, Return of Organization Exempt From Income Tax/Short Form Return of Organization Exempt From Income Tax, also filed Forms 990-T. Aggregate gross UBI reported on the 10,064 Forms 990-T that they filed accounted for less than one-half of 1 percent of their total revenue. Grouping by asset-size classes clearly distinguishes these nonprofit charitable organizations, within the context of the percentage of organizations that filed Forms 990-T and the percentage of their total revenue attributable to unrelated business income. Across six asset-size classes, the percentage of nonprofit charitable organizations that filed both Forms 990/990-EZ and 990-T for 2003 increased incrementally as asset size increased, from about 1 percent for charities with assets under $100,000 to 39 percent for charities with assets of $50,000,000 or more. For the 10,064 nonprofit charitable organizations filing both Forms 990/990-EZ and 990-T, ratios of gross UBI to total revenue differ significantly among various asset-size classes. Charities within the two smallest asset-size classes, those with assets under $500,000, reported gross UBI that was 37 percent of their total revenue, compared to charities with assets of $50,000,000 or more, whose gross UBI was under 1 percent of their total revenue. Even so, these largest organizations were responsible for 70 percent of aggregate gross UBI reported by all charities that filed Forms 990/990-EZ. Within the medium asset-size classes, gross UBI ranged from 2 percent to 3 percent of total revenue. Additional statistics on selected sources of total revenue and UBI of nonprofit charitable organizations are presented in Figure B.
Data Sources and Limitations
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The Tax Year 2003 Form 990-T study incorporated a two-stage sample design consisting of a stratified random sample and a special “integrated” sample. The stratified random sample was designed to represent the entire population of Form 990-T filers reporting unrelated business income. The integrated sample was designed to gather information on “related” (tax-exempt) and “unrelated” (taxable) income and expenses for section 501(c)(3) nonprofit charitable organizations that filed both Form 990, Return of Organization Exempt from Income Tax (or Form 990-EZ, the short-form version of this information return), and Form 990-T. This integrated sampling program ensured that the Statistics of Income sample
of Forms 990-T included any unrelated business income tax returns (with gross UBI of $1,000 or more) filed by organizations whose Form 990 or Form 990-EZ information returns were selected for the separate sample of section 501(c)(3) nonprofit charitable organizations. Organizations exempt under other Code sections were not subjected to the integrated sampling program. The Form 990-T returns were initially divided into strata, based on gross UBI, and selected using Bernouli sampling. Section 501(c)(3) returns not selected randomly were then linked, by Employer Identification Number (EIN), to returns in the Forms 990/990-EZ sample. These linked returns, along with any randomly selected Forms 990-T that also had counterparts in the Forms 990/990-EZ sample, formed the “integrated” IRC section 501(c)(3) portion of the Form 990-T sample [11]. Returns in the Form 990-T sample frame were classified into two-dimensional strata, based on the size of gross UBI in the Form 990-T population and the size of assets in the section 501(c)(3) Form 990/990-EZ population of returns having EINs that matched Form 990-T EINs. Within the two populations, returns in each stratum were identified by a distinct two-digit sample code. Thus, the Forms 990-T and 990/990-EZ matched sample strata were labeled with combined four-digit sample codes. The first two digits represented the income sample code from Form 990-T, and the last two represented the asset sample code from Form 990/990-EZ. An asset sample code of “00” was assigned when Form 990-T had no matching Form 990/990-EZ. The rate applied to the sample strata was the higher of the UBI or asset rate. The strata were then consolidated into five sample groups for weighting purposes. As shown in Figure D, the designed sampling rates ranged from a minimum of 2 percent (Form 990-T gross UBI less than $20,000, with either no Form 990/990-EZ EIN match or an EIN match to a section 501(c)(3) Form 990/990-EZ with total assets under $1,000,000) to a maximum of 100 percent (either Form 990-T gross UBI of $300,000 or more, or Form 990-T with any amount of gross UBI and an EIN match to a section 501(c)(3) Form 990 with total assets of $30,000,000 or more). Other Forms 990-T were selected at rates ranging from 4 percent to 30 percent. The population from which the Form 990-T sample was drawn consisted of Tax Year 2003 Form
Unrelated Business Income Tax Returns, 2003
Figure D
Population and Sample Counts, and Designed and Achieved Sample Rates, by Sample Group, Tax Year 2003
Sample group number 1 Sample group [1] Population count (1) Gross unrelated business income (UBI) $1,000 under $20,000 and total assets under $1,000,000, or Gross UBI $1,000 under $20,000 and no matching IRC section 501(c)(3) Form 990 or Form 990-EZ... Gross UBI $1,000 under $20,000 and total assets $1,000,000 under $2,500,000, or Gross UBI $20,000 under $60,000 and total assets under $2,500,000, or Gross UBI $20,000 under $60,000 and no matching Form 990 or Form 990-EZ.................................... Gross UBI $1,000 under $60,000 and total assets $2,500,000 under $10,000,000, or Gross UBI $60,000 under $150,000 and total assets under $10,000,000, or Gross UBI $60,000 under $150,000 and no matching Form 990 or Form 990-EZ.................................. Gross UBI $1,000 under $150,000 and total assets $10,000,000 under $30,000,000, or Gross UBI $150,000 under $300,000 and total assets under $30,000,000, or Gross UBI $150,000 under $300,000 and no matching Form 990 or Form 990-EZ................................ Gross UBI $300,000 or more, or total assets $30,000,000 or more......................................................... All sample groups [2]…….................................................................................................................. 14,963 Sample count (2) 299 Designed Achieved sample sample rate rate Percentage (3) (4) 2.00 2.00
2
7,127
296
4.00
4.15
3
6,336
628
10.00
9.91
4
2,951 4,827 36,204
902 4,827 6,952
30.00 100.00 N/A
30.57 100.00 19.20
5
N/A - Not applicable. [1] The Form 990-T sample included returns that were initially selected based on independent Form 990-T sampling criteria, and additional returns that were not initially but were subsequently matched to returns in the Forms 990 and 990-EZ sample of IRC section 501(c)(3) filers. Form 990-EZ may be completed by smaller organizations, those with gross receipts of less than $100,000 and end-of-year assets of less than $250,000. Gross unrelated business income is obtained from Form 990-T, and Total assets are obtained from Form 990/990EZ. [2] After excluding returns that were originally selected for the sample but later rejected, the sample size was 6,925, and the estimated population size was 36,064.
990-T records posted to the IRS Business Master File system during 2004 and 2005. Returns filed after Calendar Year 2005 were not included in the sample, unless a return was considered a large income-size case (over $300,000 or more of gross UBI). A sample of 6,952 returns was selected from a population of 36,204. After excluding returns that were selected for the sample but later rejected, the resulting sample size was 6,925 returns, and the estimated population size was 36,064. Rejected returns included those that had gross UBI below the $1,000 filing threshold; were filed for a part-year accounting period for 2003, and a full-year return was also filed for that year; or were filed for a part-year accounting period that began in a year other than 2003. For example, a final return filed for the 6-month period of January 2004-June 2004 may have been initially selected for the 2003 sample based on the criterion of an accounting period that ended between December 2003 and November 2004, but it was later rejected because, in actuality, it was a Tax Year 2004 return.
The information presented in this article was obtained from returns as originally filed with the Internal Revenue Service. The data were subjected to comprehensive testing and correction procedures in order to improve statistical reliability and validity. In most cases, due to time constraints, changes made to the original return as a result of administrative processing, audit procedures, or a taxpayer amendment were not incorporated into the database. Because the data are based on a sample, they are subject to sampling error. In order to use these statistics properly, the magnitude of the sampling error, measured by the coefficient of variation (CV), should be taken into account. Figure E shows CVs for selected financial data estimates derived from the Form 990-T stratified random sample. CVs are not shown for returns with gross UBI of $300,000 or more because they were sampled at a 100-percent rate and, therefore, are not subject to sampling variability. Figure F contains CVs for selected financial data estimates derived from the Forms 990/990-EZ and 990-T integrated sample of nonprofit charitable
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Figure E
Coefficients of Variation for Selected Items From the Form 990-T Sample, by Size of Gross Unrelated Business Income, Tax Year 2003
Gross Size of gross unrelated business income Number of returns unrelated business income Total deductions Unrelated business taxable income Total tax
Explanation of Selected Terms
Coefficient of variation (percentage) (1) Total..................................... $1,000 under $10,001 [1]........ $10,001 under $100,000 [1].... $100,000 under $300,000....... $300,000 or more.................... 0.16 3.07 2.77 2.30 N/A (2) 0.20 4.71 2.23 1.80 N/A (3) 0.26 7.23 2.82 2.12 N/A (4) 1.07 9.65 7.07 6.07 N/A (5) 0.96 9.99 8.01 7.98 N/A
N/A - Not applicable because the achieved sample rate was 100 percent. [1] Organizations with gross unrelated business income (UBI) between $1,000 (the filing threshold) and $10,000 were not required to report itemized expenses and deductions, or to complete return schedules. Those with gross UBI over $10,000 were required to fill out a more detailed "complete" return.
organizations. Forms 990/990-EZ and 990-T integrated sample estimates are presented in Figures B and C in this article. A discussion of the reliability of estimates based on samples and methods for evaluating both the magnitude of sampling and nonsampling error and the precision of sample estimates can be found in the general Appendix, located near the back of this issue of the SOI Bulletin.
In some of the following explanations, tax-exempt organizations are cited by the Internal Revenue Code section under which they are described. The various types of tax-exempt organizations subject to the unrelated business income tax provisions are described by Code section in the Appendix to this article. This section provides definitions for the terms contained in the article and in Tables 1 through 7, at the end of the article. Advertising Income.—Gross income realized by a tax-exempt organization from the sale of advertising in a periodical was gross income from an unrelated trade or business activity involving the “exploitation of an exempt activity,” namely, the circulation and readership of the periodical developed by producing and distributing the readership content of that periodical. Advertising income was reported separately from other types of “exploited exempt activity income.” (See the explanation of Exploited Exempt Activity Income.) Internal Revenue Code section 501(c)(7), (9), and (17) organizations reported gross advertising income, as well as other types of “exploited exempt activity income,” as part of gross receipts from sales and services. All other organizations reported this income separately.
Figure F
Coefficients of Variation for Selected Items From the Forms 990/990-EZ and 990-T Integrated Sample, by Size of Total Assets, Tax Year 2003
Form 990/990-EZ Number of Size of total assets returns Total revenue Total expenses Gross unrelated business income Coefficient of variation (percentage) (1) Total............................................................................. Under $100,000 [1].......................................................... $100,000 under $500,000............................................... $500,000 under $1,000,000............................................ $1,000,000 under $10,000,000....................................... $10,000,000 under $50,000,000..................................... $50,000,000 or more.......................................................
N/A - Not applicable because the achieved sample rate was 100 percent. [1] Includes returns with zero assets or assets not reported. NOTE: Data are from Forms 990, 990-EZ, and 990-T for nonprofit charitable organizations that are tax-exempt under Internal Revenue Code section 501(c)(3) and exclude private foundations, most organizations with receipts less than $25,000, most churches, and certain other types of religious organizations.
Form 990-T Total deductions
(2) 5.71 0.45 34.49 36.34 47.19 10.03 6.39 N/A
(3) 0.49 34.28 37.20 51.60 9.99 6.61 N/A
(4) 4.66 67.32 52.81 49.26 16.87 11.68 N/A
(5) 4.55 64.72 53.28 51.02 16.37 11.09 N/A
24.01 22.70 32.69 6.81 4.50 N/A
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Capital Gain Net Income.—Generally, organizations required to file Form 990-T (except organizations tax-exempt under Internal Revenue Code sections 501(c)(7), (9), and (17)) were not taxed on net gains from the sale, exchange, or other disposition of property. However, capital gain net income on sales of debt-financed property, certain gains on the cutting of timber (section 1231), and gains on sales of certain depreciable property (described in sections 1245, 1250, 1252, 1254, and 1255) were considered taxable. Also, any gain or loss passed through from a partnership or S corporation, or any gain or loss on the disposition of S corporation stock by a “qualified tax-exempt” (defined in the explanation of Income (Less Loss) from Partnerships and S Corporations), was taxed as a capital gain or loss. (See the explanation of Investment Income (Less Loss) for information regarding investment income of section 501(c)(7), (9), and (17) organizations.) Contributions.—To the extent permissible under the Internal Revenue Code, a deduction was allowed for contributions or gifts actually paid within the tax year to, or for the use of, another entity that was a charitable or Governmental organization described in Code section 170(c). A tax-exempt corporation was allowed a deduction for charitable contributions up to 10 percent of its unrelated business taxable income (UBTI) computed without regard to the deduction for contributions. A tax-exempt trust was generally allowed a deduction for charitable contributions under the rules applicable to individual taxpayers, except the limit on the deduction was determined in relation to UBTI computed without regard to the contributions deduction, rather than in relation to adjusted gross income. Contributions in excess of the respective corporate or trust limitations may be carried over to the next 5 taxable years, subject to certain rules. The contributions deduction was allowed whether or not directly connected with the carrying on of a trade or business. Cost of Sales and Services.—Cost of sales and services may have included depreciation, salaries and wages, and certain other types of deductible items. For this reason, the total amount shown for some of the separately reported components of total deductions, such as “salaries and wages,” may be understated. Cost of sales and services was subtracted from gross receipts from sales and services in computing gross profit (less loss) from sales and services,
which is a component of gross unrelated business income (UBI). Deductions Directly Connected With Unrelated Business Income.—These were deductions allowed in computing net income, if they otherwise qualified as income tax deductions under the Internal Revenue Code and if they had a “proximate and primary” relationship to carrying on an unrelated trade or business. Allowable deductions included those allocable to rental of personal property; those allocable to unrelated debt-financed income; those allocable to investment income of Internal Revenue Code section 501(c)(7), (9), and (17) organizations; those allocable to interest, annuities, royalties, and rents received from “controlled organizations” (see definition of Income from Controlled Organizations); those allocable to “exploited exempt activity income” other than advertising; direct advertising costs; compensation of officers, directors, and trustees; salaries and wages; repairs and maintenance; bad debts; interest; taxes and licenses; depreciation (unless deducted elsewhere); depletion; contributions to deferred compensation plans; contributions to employee benefit plans; the “net operating loss deduction”; and “other deductions.” Tax-exempt organizations with gross unrelated business income (UBI) above $10,000 were required to report each deduction component separately. Organizations with gross UBI between $1,000 (the filing threshold) and $10,000 reported a single total of the first five types of directly-connected expenses listed above (those described as “allocable to”) and a single total for all other types of deductions (both deductions directly connected with UBI and those not directly connected, each defined elsewhere in this section), except for two items that were required to be reported separately: the “net operating loss deduction” (directly connected) and the “specific deduction” (not directly connected), both also defined below. Deductions Not Directly Connected With Unrelated Business Income.—The component deductions were “set-asides,” “excess exempt expenses,” charitable contributions, and the “specific deduction.” The specific deduction was reported, when applicable, by all organizations with positive taxable income; the other types of deductions not directly connected with UBI were reported separately, when applicable, only by tax-exempt organizations with gross UBI above $10,000. (See, also, the expla-
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nations of Set-Asides, Excess Exempt Expenses, Contributions, and the Specific Deduction.) Excess Exempt Expenses.—The two types of “excess” expenses allowed as deductions from unrelated business income were (1) excess exempt expenses attributable to commercial exploitation of exempt activities, and (2) excess exempt expenses attributable to advertising income. In the case of “exploited” exempt activity income (see the explanation of Exploited Exempt Activity Income, Except Advertising, below), if the expenses of the organization’s exempt activity exceeded the income from the exempt activity, then the excess expenses could be used to offset any positive net unrelated business income produced from exploiting the exempt activity, to the extent that it did not result in a loss. Excess expenses of a commercially exploited exempt activity could not be used to offset income from another type of unrelated business activity if the unrelated activity did not exploit that particular exempt activity. In the case of excess exempt expenses attributable to advertising income, if the expenses attributable to producing and distributing the readership content of a periodical exceeded the circulation income, then the excess of readership costs over circulation income could be used to offset any net gain from advertising (gross advertising income less direct advertising costs), to the extent that it did not result in a loss. Exploited Exempt Activity Income, Except Advertising.—In some cases, exempt activities create goodwill or other intangibles that are capable of being exploited in a commercial manner. When an organization exploited such an intangible in commercial activities that did not contribute importantly to the accomplishment of an exempt purpose, the income it produced was gross income from an unrelated trade or business. An example of this type of activity would be an exempt scientific organization with an excellent reputation in the field of biological research that exploits its reputation regularly by selling endorsements of laboratory equipment to manufacturers. Endorsing laboratory equipment would not have contributed importantly to the accomplishment of any purpose for which tax exemption was granted to the organization. Accordingly, the income from selling such endorsements is gross unrelated business income. Exploited exempt activity income from advertising was reported separately from other types of exploited exempt activity income (see the explana-
tion of Advertising Income). Internal Revenue Code section 501(c)(7), (9), and (17) organizations reported income from exploited exempt activities as part of gross receipts from sales and services. All other organizations reported this income separately. Gross Profit (Less Loss) from Sales and Services.— This was the gross profit (less loss) from any unrelated trade or business regularly carried on that involved the sale of goods or performance of services. Gross profit (less loss) from sales and services is computed as gross receipts from sales or services, less returns and allowances, minus cost of sales and services. Gross Unrelated Business Income (UBI).—This was the total gross unrelated business income prior to reduction by allowable deductions used in computing unrelated business taxable income. All organizations were required to report detailed sources of gross UBI. The components of gross UBI were gross profit (less loss) from sales and services; capital gain net income; net gain (less loss) from sales of noncapital assets; net capital loss deduction (trusts only); income (less loss) from partnerships and S corporations; rental income; unrelated debt-financed income; investment income (less loss) of Internal Revenue Code section 501(c)(7), (9), and (17) organizations; income (annuities, interest, rents, and royalties) from controlled organizations; “exploited exempt activity” income, except advertising; advertising income; and “other” income (less loss). (For an explanation of these sources of income, see the separate explanations of each component.) A tax-exempt organization’s income was treated as unrelated business income if it was from a trade or business that was regularly carried on by the organization and that was not substantially related to the performance of the organization’s exempt purpose or function (other than that the organization needed the profits derived from the unrelated activity). The term “trade or business” generally comprised any activities carried on for the production of income from selling goods or performing services. These activities did not lose their identity as trades or businesses merely because they were carried on within a larger aggregate of similar activities or within a larger complex of other endeavors that may, or may not, have been related to the exempt purposes of the organization. For example, soliciting, selling, or publishing commercial advertising is identified as a trade or business even though the advertising is
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published in an exempt organization’s periodical that contains editorial matter related to the organization’s exempt purpose. Income from Controlled Organizations.—When an exempt organization controlled another organization, the entire amount of gross annuities, interest, rents, and royalties (termed “specified payments”) received from the controlled organization were included in the gross UBI of the controlling organization. They were included only to the extent that the specified payments were claimed as a deduction from the controlled organization’s own UBI (in the case of an exempt controlled organization) or the “equivalent” of UBI (in the case of a nonexempt controlled organization). The equivalent of UBI was computed as if the nonexempt controlled organization were exempt and had the same exempt purpose as the controlling organization. “Control” meant: (a) for a stock corporation, the ownership (by vote or value) of more than 50 percent of the stock; (b) for a partnership, ownership of more than 50 percent of the profits or capital interests; or (c) for any other organization, ownership of more than 50 percent of the beneficial interests. All deductions “directly connected” with a Form 990-T filer’s gross controlled-organization income were allowed. The rules for debt-financed property did not apply to passive income (generally, investment income) from controlled organizations. (See the definition of Unrelated Debt-Financed Income.) Income (Less Loss) from Partnerships and S Corporations.—If an organization was a partner in any partnership that carried on an unrelated trade or business, this income item included the organization’s share of partnership gross unrelated business income less its share of partnership deductions that were directly connected with the unrelated income. If an organization was a “qualified tax-exempt” that held stock in an S corporation, this income item included the income or loss from the stock interest. The stock interest was treated as an unrelated trade or business, and all items of income, loss, or deduction were taken into account in computing unrelated business taxable income. A “qualified tax-exempt” was an organization described in Internal Revenue Code section 401(a) (qualified stock bonus, pension, or profit-sharing plan) or section 501(c)(3), and exempt from tax under section 501(a). Investment Income (Less Loss).—This income was reported only by organizations exempt under
Internal Revenue Code sections 501(c)(7), (9), and (17) and included such income as gross unrelated debt-financed income, gross income from the ownership or sale of securities, and set-asides deducted from investment income in previous years that were subsequently used for a purpose other than that for which a deduction was allowed. (See, also, the explanation of Set-Asides.) All gross rents (except those that were exempt-function income) from investment property of section 501(c)(7), (9), and (17) organizations were treated as unrelated business income and were reported as “rental income.” Organizations exempt under sections other than 501(c)(7), (9), and (17) did not report “investment income (less loss).” Generally, these organizations’ investment incomes (dividends, interest, rents, and annuities) and royalty incomes were not taxed as unrelated business income, unless it was income, other than dividends, from a controlled organization or debt-financed income, or the rents were of the type described in the explanation of rental income. (See explanations of Income from Controlled Organizations, Rental Income, and Unrelated DebtFinanced Income.) Net Capital Loss (Trusts Only).—If a trust had a net loss from sales or exchanges of capital assets, it was allowed a deduction for the amount of the net loss or $3,000, whichever was lower. (Tax-exempt corporations were not allowed to deduct any excesses of capital losses over capital gains.) Tax-exempt trusts reported the net capital loss deduction on Form 990-T as a component of gross unrelated business income, and it was subtracted when computing total gross UBI. Net Gain (Less Loss), Sales of Noncapital Assets.—This was the gain or loss from the sale or exchange of business property, as reported on Form 4797, Sales of Business Property. Property other than capital assets generally included property of a business nature, in contrast to personal and investment properties, which were capital assets. Net Operating Loss Deduction (NOLD).—The net operating loss carryover or carryback (as described in Internal Revenue Code section 172) was allowed as a deduction (limited to the current-year excess of receipts over deductions, prior to applying the NOLD) in computing unrelated business taxable income. However, the net operating loss carryover or carryback (allowed only to or from a tax year for
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which the organization was subject to tax on unrelated business income) was determined without taking into account any amount of exempt-function income or deductions that had been excluded from the computation of unrelated business taxable income. A “net operating loss” represented the excess of deductions over receipts for a specified year for which an organization reported an overall deficit from its unrelated trade or business activities. The net operating loss deduction statistics in this article represent only net operating loss carryovers from prior years because carrybacks from future years would be reported in a later year on an amended return, not on the return as initially filed (which served as the basis for the statistics). Other Deductions.—This included all types of unrelated business deductions that were not specifically required to be reported elsewhere on the tax return. Examples are fees for accounting, legal, consulting, or financial management services; insurance costs (if not for employee-related benefits); equipment costs; mailing costs; office expenses, such as janitorial services, supplies, or security services; rent; travel expenses; educational expenses; and utilities. Other Income (Less Loss).—This included all types of unrelated business income that were not specifically required to be reported elsewhere on the tax return. Examples are insurance benefit fees; member support fees; commissions; returned contributions that were deducted in prior years; income from insurance activities that was not properly set aside in prior years; recoveries of bad debts; and refunds of State or local government tax payments, if the payments were previously reported as a deduction. Proxy Tax.—This was a tax on certain nondeductible lobbying and political expenditures. A membership organization that was tax-exempt under Internal Revenue Code sections 501(c)(4), 501(c)(5), or 501(c)(6) was liable for the proxy tax if the organization did not notify its members of the shares of their dues that were allocated to the nondeductible lobbying and political expenditures, or if the notice did not include the entire amount of dues that was allocated. The proxy tax was computed as 35 percent of the aggregate amount of nondeductible lobbying expenditures that was not included in the notices sent to the organization’s members. The proxy tax was required to be reported on Form 990-T and was included in total tax; however, there was no connection
between the proxy tax and the taxation of income from an organization’s unrelated business activities. Rental Income.—For organizations tax-exempt under Internal Revenue Code sections other than 501(c)(7), (9), and (17), this was the amount of (1) gross rents from personal property (e.g., computer equipment or furniture) leased with real property, if the rental income from the personal property was more than 10 percent, but not more than 50 percent, of the total rents from all leased property; or (2) gross rents from both real property and personal property leased with real property if the personal property was more than 50 percent of the total rents from all leased property. Except for the second situation covered above, gross rents from real property were generally excluded in computing unrelated business taxable income. In addition, gross rents from personal property that did not exceed 10 percent of the total rents from all leased property were excluded (and not included in gross UBI). Any rents not covered by the explanation of “rental income” had to be considered in terms of their taxability as unrelated business income from controlled organizations or unrelated debt-financed income, in that order. For organizations tax-exempt under sections 501(c)(7), (9), and (17), rental income included all gross rents (except those that were exempt-function income), with no exclusions. (See explanations of Income from Controlled Organizations and Unrelated Debt-Financed Income.) Set-Asides.—This deduction from investment income was allowed to social and recreational clubs (Internal Revenue Code section 501(c)(7)), voluntary employees’ beneficiary associations (section 501(c)(9)), and supplemental unemployment benefit trusts (section 501(c)(17)). The deduction was equal to the amount of passive income (generally, investment income) that these organizations set aside (1) to be used for charitable purposes or (2) to provide payment of life, health, accident, or other insurance benefits (section 501(c)(9) and (17) organizations only). However, any amounts set aside that exceeded the “qualified asset account” limit, as figured under section 419A, were not allowed as a deduction from unrelated business investment income; they were treated as taxable investment income. A section 419A qualified asset account is any account consisting of assets set aside to provide for the payment of disability benefits, medical benefits, severance pay benefits, or life insurance benefits.
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Specific Deduction.—The specific deduction was $1,000 or the amount of positive taxable income, whichever was less. The amount deducted was considered “not directly connected” with gross unrelated business income and was allowed to all organizations that had positive taxable income after all other types of deductions were taken. This deduction provided the equivalent benefit of the $1,000 gross unrelated business income filing threshold under which some organizations were exempted from filing a return and paying the unrelated business income tax. Total Deductions.—Total deductions included both deductions reported on the main part of Form 990-T and expense items reported on any of six supporting schedules, which were also part of the tax form. They excluded cost of sales and services, which was subtracted from gross receipts from sales and services in computing gross profit (less loss) from sales and services, which is a component of gross unrelated business income (UBI). (See the explanation of Cost of Sales and Services.) Total Tax.—Total tax was unrelated business income tax less the foreign tax credit, general business credit, credit for prior-year minimum tax, and other allowable credits, plus the “proxy tax” on certain lobbying and political expenditures, the “alternative minimum tax,” and “other” taxes. Unrelated Business Income (UBI).—See definition of Gross Unrelated Business Income (UBI). Unrelated Business Income Tax.—This was the tax imposed on unrelated business taxable income. It was determined based on the regular corporate or trust income tax rates that were in effect for the 2003 Tax Year, as shown in the following schedules. Tax Rates for Corporations Amount of unrelated business taxable income is: Over—
$0 50,000 75,000 100,000 335,000 10,000,000 15,000,000 18,333,333
Tax Rates for Trusts Amount of unrelated business taxable income is: But not over— $1,900 4,500 6,850 9,350 — Of the amount over— $0 1,900 4,500 6,850 9,350
Over— $0 1,900 4,500 6,850 9,350
Tax is: 15% $285 + 25% 935 + 28% 1,593 + 33% 2,418 + 35%
But not over—
Tax is:
Of the amount over—
$50,000 15% $0 75,000 $7,500 + 25% 50,000 100,000 13,750 + 34% 75,000 335,000 22,250 + 39% 100,000 10,000,000 113,900 + 34% 335,000 15,000,000 3,400,000 + 35% 10,000,000 18,333,333 5,150,000 + 38% 15,000,000 — 35% 0
Unrelated Business Taxable Income (Less Deficit).—This was gross income derived from any unrelated trade or business regularly carried on by an exempt organization, less deductions directly connected with carrying on the trade or business and less other allowable deductions not directly connected. On a return-by-return basis, the result of this computation was either positive (unrelated business taxable income), negative (deficit), or zero. Taxable income was subject to the unrelated business income tax. (See, also, explanations of Deductions Directly Connected With Unrelated Business Income and Deductions Not Directly Connected With Unrelated Business Income.) Unrelated Debt-Financed Income.—Gross income from investment property for which acquisition indebtedness was outstanding at any time during the tax year was subject to the unrelated business income (UBI) tax. The percentage of investment income to be included as gross UBI was proportional to the ratio of average acquisition indebtedness to the average adjusted basis of the property. Various types of passive income (generally, investment income) were considered to be unrelated debt-financed income, but only if the income arose from property acquired or improved with borrowed funds and if the production of income was unrelated to the organization’s tax-exempt purpose. When any property held for the production of income by an organization was disposed of at a gain during the tax year, and there was acquisition indebtedness outstanding at any time during the 12-month period prior to the date of disposition, the property was considered debt-financed property, and the gain was treated as unrelated
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debt-financed income. Income from debt-financed property did not include rents from personal property (e.g., computers or furniture) leased with real property, certain passive income (generally, investment income) from controlled organizations, and other amounts that were otherwise included in computing unrelated business taxable income. Internal Revenue Code section 501(c)(7), (9), and (17) organizations reported all debt-financed income as “Investment Income (Less Loss).” All other organizations reported debt-financed income separately.
statistics, may not necessarily be the amount ultimately paid to the Internal Revenue Service (IRS). Changes in tax liability assessments can be made after the original return is filed, either by the taxpayer on an amended return, by the IRS after examination, or by litigation. [4] The term “nonprofit charitable organizations” refers to tax-exempt organizations with purposes that are charitable, educational, scientific, literary, or religious in nature, or organizations that test for public safety or prevent cruelty to children or animals. [5] A business activity is considered unrelated if it does not contribute importantly (other than the production of funds) to accomplishing an organization’s charitable, educational, or other purpose that is the basis for the organization’s tax exemption. In determining whether activities contribute importantly to the accomplishment of an exempt purpose, the size, extent, and nature of the activities involved must be considered in relation to the size, extent, and nature of the exempt function that they intend to serve. To the extent an activity is conducted on a scale larger than is reasonably necessary to perform an exempt purpose, it does not contribute importantly to the accomplishment of the exempt purpose. The part of the activity that is more than needed to accomplish the exempt purpose is an unrelated trade or business. Whether an activity contributes importantly depends in each case on the facts involved. See IRS Publication 598, Tax on Unrelated Business Income of Exempt Organizations, for additional information on unrelated business income and tax. The following is a case example from Publication 598. An American folk art museum operates a shop in the museum that sells reproductions of works in the museum’s own collection and also works from the collections of other art museums. In addition, the museum sells souvenir items of the city where the museum is located. The sale of the reproductions, regardless of which museum houses the original works, is considered to be “related” because it contributes importantly to the achievement of the museum’s exempt educational purpose by making works of art familiar to a broader segment of the public, thereby enhancing the
Notes and References
[1] The unrelated business income tax (UBIT) was imposed on the portion of a tax-exempt organization’s income produced from a trade or business that was conducted on a regular basis and was not substantially related to the organization’s tax-exempt mission. After reducing gross income by allowable deductions, any resulting positive net income was subject to UBIT. [2] The proxy tax is required to be reported on Form 990-T and is included in total tax, but it has no connection to the imposition of the unrelated business income tax or an organization’s involvement in unrelated business activities. A tax-exempt membership organization was liable for the proxy tax on certain nondeductible lobbying and political expenditures if the organization did not notify its members of the shares of their dues that were allocated to the nondeductible expenditures, or if the notice did not include the entire amount of dues that was allocated. (See “Proxy Tax” in the Explanation of Selected Terms section of this article for more information.) The proxy tax of $3.0 million shown in the total tax computation is only that reported by Form 990-T filers with gross unrelated business income above the $1,000 filing threshold, a criterion for selection for the Statistics of Income (SOI) sample. Proxy tax reported by organizations that had no UBI or those that had UBI below the filing threshold is not included. According to IRS Business Returns Transactions File records, total proxy tax of $10.8 million was reported on Forms 990-T for Tax Year 2003.
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[3] The amount of total tax liability originally reported on Forms 990-T, as stated in these
Unrelated Business Income Tax Returns, 2003
public’s understanding and appreciation of art. However, the sale of souvenir items depicting the city in which the museum is located is considered to be “unrelated” because it has no causal relationship to art or to artistic endeavor, and, therefore, does not contribute importantly to the accomplishment of the museum’s exempt educational purposes. [6] The unrelated business income tax (UBIT) for exempt corporations and trusts is determined based on the regular corporate and trust income tax rates in effect for the tax year of the Form 990-T filing. Trusts that are eligible for the maximum 28-percent tax rate on capital gain net income figured their tax based on Schedule D of Form 1041, U.S. Income Tax Return for Estates and Trusts. The corporate and trust tax-rate schedules for Tax Year 2003 are included in the definition of Unrelated Business Income Tax, found in the Explanation of Selected Terms section of this article. [7] Churches, which are tax-exempt under Internal Revenue Code section 501(c)(3), are not required to apply for exemption unless they desire to obtain an Internal Revenue Service ruling, and they do not have to file a Form 990 information return. However, these churches are required to file Form 990-T if they received $1,000 or more of gross income from business activities that were considered unrelated to their religious purposes. For the most recent Form 990 annual data on organizations taxexempt under Internal Revenue Code sections 501(c)(3) (excluding private foundations and most religious organizations) through 501(c)(9), see Arnsberger, Paul D., “Charities and Other Tax-Exempt Organizations, 2003,” Statistics of Income Bulletin, Fall 2006, Volume 26, Number 2. For the most recent data on private foundations, see Ludlum, Melissa, “Private Foundations, Tax Year 2003,” Statistics of Income Bulletin, Fall 2006, Volume 26, Number 2. Internal Revenue Code 4947(a)(1) “nonexempt charitable trusts” and section 4947(a)(2) “split-interest trusts” are required to report unrelated business income on Form 1041,
Estate and Trust Income Tax Return, rather than Form 990-T. For information on split-interest trusts, which file Form 5227, Split-Interest Trust Information Return, see Schreiber, Lisa, “Split-Interest Trusts, Filing Year 2005,” in this issue of the Statistics of Income Bulletin. These reports, along with statistical tables in Excel format, are available from the Tax Stats pages on the IRS Web site at http://www.irs. gov/taxstats. [8] Under the Pension Protection Act of 2006, Internal Revenue Code section 501(c)(3) organizations are required to make available for public inspection any Forms 990-T filed after August 18, 2006, the date of enactment. However, the Act did not give authorization to IRS to disseminate Form 990-T information to the public. [9] The main sources of data for this analysis were Form 990, Part I, “Revenue, Expenses, and Changes in Net Assets or Fund Balances,” and Form 990-T, Part I, “Unrelated Trade or Business Income.” [10] Primary and secondary unrelated business activities are self-reported on Form 990-T, based on selected North American Industrial Classification System (NAICS) codes. Organizations code their primary and secondary activities based on the largest and second largest amounts of gross unrelated business income that each of their activities produces. See Table 5 at the end of this article for selected financial data distributed by major unrelated business activities/industrial groupings for all Form 990-T filers. The data shown in Figure C and Table 5 are based on the primary unrelated business activity only. [11] For additional information on the Forms 990 and 990-T integrated sample design, see Harte, James M. and Hilgert, Cecelia H., “Enriching One Sample While Improving Another: Linking Differently Stratified Samples of Documents Filed by Exempt Organizations,” Statistics of Income, Turning Administrative Systems Into Information Systems, 1993.
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Appendix Types of Tax-Exempt Organizations Subject to the Unrelated Business Income Tax Provisions, by Internal Revenue Code Section
Code section 220(e) Description of organization Archer Medical Savings Accounts (MSA's) General nature of activities Fiduciary agent for accounts used in conjunction with high-deductible health insurance plans to save funds for future medical expenses Fiduciary agent for pension, profit-sharing, or stock bonus plans Fiduciary agent for retirement funds Fiduciary agent for retirement funds; subject to same rules as traditional IRA's, except contributions are not tax deductible and qualified distributions are tax free Holding title to property for exempt organizations Activities of a nature implied by the description of the class of organization
401(a) 408(e) 408A
Qualified pension, profit-sharing, or stock bonus plans Traditional Individual Retirement Accounts (IRA's) Roth Individual Retirement Accounts (IRA's)
501(c)(2) (3)
Title-holding corporations for exempt organizations Religious, educational, charitable, scientific, or literary organizations; testing for public safety organizations. Also, organizations preventing cruelty to children or animals, or fostering national or international amateur sports competition Civic leagues, social welfare organizations, and local associations of employees Labor, agricultural, and horticultural organizations
(4)
Promotion of community welfare and activities from which net earnings are devoted to charitable, educational, or recreational purposes Educational or instructive groups whose purpose is to improve conditions of work, products, and efficiency Improving conditions in one or more lines of business Pleasure, recreation, and social activities Lodges providing for payment of life, health, accident, or other insurance benefits to members Providing for payment of life, health, accident, or other insurance benefits to members Lodges, societies, or associations devoting their net earnings to charitable, fraternal, and other specified purposes, without life, health, or accident insurance benefits to members Fiduciary associations providing for payment of retirement benefits
(5)
(6) (7) (8) (9)
Business leagues, chambers of commerce, real estate boards, and like organizations Social and recreational clubs Fraternal beneficiary societies and associations Voluntary employees' beneficiary associations (including Federal employees' voluntary beneficiary associations formerly covered by section 501(c)(10)) Domestic fraternal beneficiary societies and associations
(10)
(11)
Teachers' retirement fund associations
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Appendix Types of Tax-Exempt Organizations Subject to the Unrelated Business Income Tax Provisions, by Internal Revenue Code Section—Continued
Code section 501(c)(12) Description of organization Benevolent life insurance associations, mutual ditch or irrigation companies, mutual or cooperative telephone companies, and like organizations Cemetery companies State-chartered credit unions and mutual insurance or reserve funds Mutual insurance companies or associations other than life, if written premiums for the year do not exceed $350,000 Corporations organized to finance crop operations Supplemental unemployment benefit trusts Employee-funded pension trusts (created before June 25, 1959) Posts or organizations of past or present members of the armed forces Black Lung Benefit Trusts General nature of activities Activities of a mutually beneficial nature implied by the description of the class of organization
(13) (14)
Arranging for burials and incidental related activities Providing loans to members or providing insurance of, or reserve funds for, shares or deposits in certain banks or loan associations Providing insurance to members, substantially at cost Financing crop operations in conjunction with activities of a marketing or purchasing association Fiduciary agent for payment of supplemental unemployment compensation benefits Providing for payments of benefits under a pension plan funded by employees Providing services to veterans or their dependents; advocacy of veteran's issues; and promotion of patriotism and community service programs Created by coal mine operators to satisfy their liability for disability or death due to black lung disease Providing funds to meet the liability of employers withdrawing from a multiple-employer pension fund Providing insurance and other benefits to veterans or their dependents Providing funds for employee retirement income Acquiring real property and remitting all income earned from such property to one or more exempt organizations; pension, profit-sharing, or stock bonus plans; or governmental units
(15)
(16) (17) (18) (19)
(21)
(22)
Withdrawal liability payment funds
(23) (24) (25)
Associations of past and present members of the armed forces founded before 1880 Trusts described in section 4049 of the Employee Retirement Income Security Act of 1974 Title-holding corporations or trusts with no more than 35 shareholders or beneficiaries and only one class of stock or beneficial interest
105
Unrelated Business Income Tax Returns, 2003
Appendix Types of Tax-Exempt Organizations Subject to the Unrelated Business Income Tax Provisions, by Internal Revenue Code Section—Continued
Code section 501(c)(26) Description of organization State-sponsored high-risk health insurance plans General nature of activities Providing coverage for medical care on a not-forprofit basis to residents with pre-existing medical conditions that resulted in denied or exorbitantly priced traditional medical care coverage Pooled employers' funds providing reimbursements to employees for losses arising under workers' compensation acts; also, State-created, -operated, and -controlled organizations providing workers' compensation insurance to employers State- and agency-maintained plans that allow individuals to purchase credits or certificates, or make contributions to an account, to pay for future educational expenses Fiduciary agent for accounts created for the purpose of paying qualified higher education expenses of a designated beneficiary
(27)
State-sponsored workers' compensation reinsurance plans
529(a)
Qualified State Tuition Plans
530(a)
Coverdell Education Savings Accounts
NOTES: Corporations that are organized under an Act of Congress, and are instrumentalities of the United States, described in section 501(c)(1) of the Internal Revenue Code, are not subject to unrelated business income taxation. Prepaid legal service funds, previously described in section 501(c)(20) of the Internal Revenue Code, were no longer tax exempt effective for tax years beginning after June 30, 1992.
106
Unrelated Business Income Tax Returns, 2003
Table 1.—Number of Returns, Gross Unrelated Business Income (UBI), Total Deductions, Unrelated Business Taxable Income (Less Deficit), Unrelated Business Taxable Income, and Total Tax, by Internal Revenue Code Section Describing Type of Tax-Exempt Organization, Tax Year 2003
[All figures are estimates based on samples —money amounts are in thousands of dollars]
Gross Internal Revenue Code section Number of returns unrelated business income (UBI) (2) 8,436,027 0 75,835 81,129 * 3,337 90,028 4,832,943 592,638 255,523 943,032 540,483 84,174 631,487 21,984 0 77,318 * 4,529 56,241 d 0 d 0 133,256 0 0 0 d d 0 d d 0
Total deductions [1, 2] Number of returns (3) 35,893 0 344 2,630 * 77 341 13,504 1,616 2,106 5,659 5,675 658 677 228 0 300 * 75 182 d 0 d 0 1,741 0 0 0 d d 0 d d 0
Unrelated business taxable income (less deficit) [3] Number of returns (5) 27,954 0 303 2,640 * 53 324 10,794 948 1,545 3,659 4,914 438 440 196 0 188 * 75 181 d 0 d 0 1,224 0 0 0 d d 0 d d 0 Amount (6) 23,204 0 39,645 9,075 * 1,929 -11,194 -168,491 -20,341 -1,356 31,313 31,500 4,544 120,382 -585 0 682 * -79 -12,935 d 0 d 0 -4,442 0 0 0 d d 0 d d 0
Unrelated business taxable income [4] Number of returns (7) 15,580 0 298 2,585 * 53 139 5,065 294 617 1,695 3,450 204 394 * 22 0 112 * 58 135 d 0 d 0 433 0 0 0 d d 0 d d 0 Number of returns (9)
Total tax [5]
Amount (4) 8,412,822 0 36,190 72,054 * 1,408 101,223 5,001,434 612,979 256,878 911,719 508,983 79,630 511,106 22,569 0 76,636 * 4,608 69,176 d 0 d 0 137,698 0 0 0 d d 0 d d 0
Amount (8) 780,149 0 40,664 19,534 * 1,929 6,530 351,523 12,630 25,181 93,737 64,621 9,870 129,032 * 1,207 0 8,505 * 842 4,797 d 0 d 0 4,756 0 0 0 d d 0 d d 0
Amount (10) 220,916 0 12,802 5,361 * 666 1,899 101,599 3,380 6,978 29,800 15,992 2,369 33,694 * 246 0 2,306 * 202 1,254 d 0 d 0 771 0 0 0 d d 0 d d 0
(1) All sections................. 220(e)............................... 401(a)............................... 408(e)............................... 408A................................. 501(c)(2) [6]...................... 501(c)(3)........................... 501(c)(4)........................... 501(c)(5)........................... 501(c)(6)........................... 501(c)(7)........................... 501(c)(8)........................... 501(c)(9)........................... 501(c)(10)......................... 501(c)(11)......................... 501(c)(12)......................... 501(c)(13)......................... 501(c)(14)......................... 501(c)(15)......................... 501(c)(16)......................... 501(c)(17)......................... 501(c)(18)......................... 501(c)(19)......................... 501(c)(21) [7].................... 501(c)(22)......................... 501(c)(23)......................... 501(c)(24)......................... 501(c)(25)......................... 501(c)(26)......................... 501(c)(27)......................... 529(a)............................... 530(a)............................... 36,064 0 345 2,691 * 77 341 13,511 1,616 2,106 5,659 5,775 658 678 228 0 300 * 75 182 d 0 d 0 1,741 0 0 0 d d 0 d d 0
15,524 0 299 2,535 * 53 139 5,080 294 618 1,827 3,321 205 393 * 46 0 112 * 58 135 d 0 d 0 383 0 0 0 d d 0 d d 0
* Estimate should be used with caution because of the small number of sample returns on which it is based. d – Data deleted to avoid disclosure of information for specific taxpayers. However, data are included in the appropriate totals. [1] Excludes cost of sales and services, which was subtracted from gross receipts from sales and services in computing gross profit from sales and services. Gross profit from sales and services was a component of gross unrelated business income (UBI). Cost of sales and services can include amounts attributable to depreciation, salaries and wages, and certain other deductible items. For all exempt organizations reporting gross UBI, cost of sales and services was $2.5 billion. [2] Includes both expenses and deductions reported on Form 990-T, lines 13(B), 29, 31, and 33. [3] Excludes data from 8,110 returns with equal amounts of gross UBI and total deductions. [4] Includes data from returns with positive amounts of unrelated business taxable income only. [5] Total tax is the regular unrelated business income tax after reduction by any tax credits (foreign tax credit, general business credit, prior-year minimum tax credit, and other allowable credits), plus the alternative minimum tax, the "proxy" tax on nondeductible lobbying and political expenditures, and "other" taxes. The proxy tax was reported on Form 990-T and was included in total tax; however, it had no connection to the tax on unrelated business income or an organization's involvement in unrelated business activities. For exempt organizations reporting gross UBI above the $1,000 filing threshold, total proxy tax was $3.0 million. [6] Corporations that are organized under an Act of Congress and are instrumentalities of the United States, described in section 501(c)(1) of the Internal Revenue Code, are not subject to unrelated business income taxation. [7] Prepaid legal service funds, previously described in section 501(c)(20) of the Internal Revenue Code, were no longer tax-exempt, beginning with tax years after June 30, 1992. Therefore, these organizations are not listed in this table. NOTES: Detail may not add to totals because of rounding. See the Appendix to this article for descriptions of the types of tax-exempt organizations filing Form 990-T, by the Internal Revenue Code section describing them.
107
Unrelated Business Income Tax Returns, 2003
Table 2.—Number of Returns, Gross Unrelated Business Income (UBI), Total Deductions, Unrelated Business Taxable Income (Less Deficit), Unrelated Business Taxable Income, and Total Tax, by Size of Gross UBI, Tax Year 2003
[All figures are estimates based on samples—money amounts are in thousands of dollars]
Gross Size of gross unrelated business income (UBI) Number of returns unrelated business income (UBI) (2) 8,436,027 52,818 540,656 1,392,866 804,835 2,110,620 3,534,231
Total deductions [1, 2] Number of returns (3) 35,893 12,531 14,450 6,456 1,154 1,044 258
Unrelated business taxable income (less deficit) [3] Number of returns (5) 27,954 9,841 11,120 5,066 916 810 201 Amount (6) 23,204 551 -14,347 -13,775 -17,491 20,658 47,608
Unrelated business taxable income [4] Number of returns (7) 15,580 6,956 5,319 2,419 445 347 93 Number of returns (9) 15,524 6,906 5,321 2,386 445 355 111
Total tax [5]
Amount (4) 8,412,822 52,266 555,003 1,406,641 822,327 2,089,962 3,486,623
Amount (8) 780,149 14,502 82,404 159,434 79,716 218,856 225,237
Amount (10) 220,916 2,325 14,530 44,064 24,262 66,951 68,785
(1) Total............................................. $1,000 under $10,001 [6] ................ $10,001 under $100,000 [6]............. $100,000 under $500,000................ $500,000 under $1,000,000............. $1,000,000 under $5,000,000.......... $5,000,000 or more.......................... 36,064 12,681 14,454 6,471 1,155 1,044 258
[1] Excludes cost of sales and services, which was subtracted from gross receipts from sales and services in computing gross profit from sales and services. Gross profit from sales and services was a component of gross unrelated business income (UBI). Cost of sales and services can include amounts attributable to depreciation, salaries and wages, and certain other deductible items. For all exempt organizations reporting gross UBI, cost of sales and services was $2.5 billion. [2] Includes both expenses and deductions reported on Form 990-T, lines 13(b), 29, 31, and 33. [3] Excludes data from 8,110 returns with equal amounts of gross UBI and total deductions. [4] Includes data from returns with positive amounts of unrelated business taxable income only. [5] Total tax is the regular unrelated business income tax after reduction by any tax credits (foreign tax credit, general business credit, prior-year minimum tax credit, and other allowable credits), plus the "alternative minimum tax," the "proxy" tax on nondeductible lobbying and political expenditures, and "other" taxes. The proxy tax was reported on Form 990-T and was included in total tax; however, it had no connection to the tax on unrelated business income or an organization's involvement in unrelated business activities. For exempt organizations reporting gross UBI above the $1,000 filing threshold, total proxy tax was $3.0 million. [6] The gross unrelated business income (UBI) brackets of "$1,000 under $10,001" and "$10,001 under $100,000" reflect the different filing requirements for organizations with gross UBI of $10,000 or less (not required to report itemized expenses and deductions, or to complete return schedules) and all other Form 990-T filers (required to file a more detailed "complete" return). Organizations with gross UBI below $1,000 were not required to file Form 990-T. NOTE: Detail may not add to totals because of rounding.
108
Unrelated Business Income Tax Returns, 2003
[All figures are estimates based on samples—money amounts are in thousands of dollars]
Table 3.—Number of Returns, Gross Unrelated Business Income (UBI), Total Deductions, Unrelated Business Taxable Income (Less Deficit), and Total Tax, by Size of Unrelated Business Taxable Income or Deficit, Tax Year 2003
Gross Number Size of unrelated business taxable income or deficit of returns unrelated business income (UBI) (1) Total.................................................... 36,064 12,374 8,110 2,839 7,392 4,188 904 114 143 (2) 8,436,027 3,809,957 1,966,547 47,013 295,084 637,592 592,081 268,484 819,269 Number of returns (3) 35,893 12,374 8,110 2,839 7,242 4,184 888 113 143 (4) 8,412,822 4,566,901 1,966,547 45,839 267,743 511,854 405,815 190,523 457,600 Amount of returns (5) 27,954 12,374 0 2,839 7,392 4,188 904 114 143 (6) 23,204 -756,944 0 1,174 27,341 125,738 186,266 77,961 361,669 Total deductions [1, 2] Unrelated business taxable income (less deficit) Number Amount Number of returns (7) 15,524 19 200 2,737 7,293 4,123 898 113 142 (8) 220,916 330 811 177 4,312 22,192 58,599 25,641 108,854 Amount Total tax [3]
Deficit...................................................... Zero [4] ................................................... $1 under $1,000...................................... $1,000 under $10,000............................. $10,000 under $100,000......................... $100,000 under $500,000....................... $500,000 under $1,000,000.................... $1,000,000 or more.................................
[1] Excludes cost of sales and services, which was subtracted from gross receipts from sales and services in computing gross profit from sales and services. Gross profit from sales and services was a component of gross unrelated business income (UBI). Cost of sales and services can include amounts attributable to depreciation, salaries and wages, and certain other deductible items. For all exempt organizations reporting gross UBI, cost of sales and services was $2.5 billion. [2] Includes both expenses and deductions reported on Form 990-T, lines 13(B), 29, 31, and 33. [3] Total tax is the regular unrelated business income tax after reduction by any tax credits (foreign tax credit, general business credit, prior-year minimum tax credit, and other allowable credits), plus the "alternative minimum tax," the "proxy" tax on nondeductible lobbying and political expenditures, and "other" taxes. The proxy tax was reported on Form 990-T and was included in total tax; however, it had no connection to the tax on unrelated business income or an organization's involvement in unrelated business activities. For exempt organizations reporting gross UBI above the $1,000 filing threshold, total proxy tax was $3.0 million. [4] The Zero category includes returns with equal amounts of gross unrelated business income and total deductions. NOTE: Detail may not add to totals because of rounding.
109
5
Unrelated Business Income Tax Returns, 2003
Table 4.—Returns with Positive Unrelated Business Taxable Income: Number of Returns, Gross Unrelated Business Income (UBI), Total Deductions, Unrelated Business Taxable Income, and Total Tax, by Type of Entity and Size of Gross UBI, Tax Year 2003
[All figures are estimates based on samples—money amounts are in thousands of dollars]
Type of entity and size of gross unrelated business income (UBI)
Number of returns
Gross unrelated business income (UBI) (2) 2,659,524 25,989 191,620 540,365 304,081 658,697 938,773
Total deductions [1, 2] Number of returns (3) 15,409 6,806 5,315 2,404 444 347 93
Amount (4) 1,879,374 11,487 109,215 380,930 224,365 439,841 713,537
Unrelated business taxable income (5) 780,149 14,502 82,404 159,434 79,716 218,856 225,237
Total tax [3] Number of returns (6) 15,305 6,856 5,232 2,351 432 341 93
Amount (7) 219,775 2,260 14,357 43,868 24,169 66,756 68,365
(1) ALL ENTITIES Total.................................................................. $1,000 under $10,001 [4]....................................... $10,001 under $100,000 [4]................................... $100,000 under $500,000...................................... $500,000 under $1,000,000................................... $1,000,000 under $5,000,000................................ $5,000,000 or more............................................... TAX-EXEMPT CORPORATIONS Total.................................................................. $1,000 under $10,001 [4]....................................... $10,001 under $100,000 [4]................................... $100,000 under $500,000...................................... $500,000 under $1,000,000................................... $1,000,000 under $5,000,000................................ $5,000,000 or more............................................... TAX-EXEMPT TRUSTS Total.................................................................. $1,000 under $10,001 [4]....................................... $10,001 under $100,000 [4]................................... $100,000 under $500,000...................................... $500,000 under $1,000,000................................... $1,000,000 under $5,000,000................................ $5,000,000 or more............................................... 3,544 2,656 527 252 45 51 12 12,036 4,300 4,793 2,167 400 296 81 15,580 6,956 5,319 2,419 445 347 93
2,355,298 18,031 172,726 484,897 273,345 562,106 844,194
11,929 4,200 4,789 2,164 400 296 81
1,811,248 7,901 104,839 370,822 216,509 417,681 693,496
544,050 10,130 67,886 114,074 56,836 144,425 150,698
11,813 4,250 4,705 2,100 387 290 81
155,103 1,522 10,407 29,822 16,953 46,192 50,208
304,226 7,958 18,894 55,468 30,736 96,591 94,580
3,480 2,606 527 240 44 51 12
68,126 3,586 4,376 10,108 7,856 22,160 20,040
236,099 4,372 14,518 45,360 22,880 74,431 74,539
3,493 2,606 527 251 45 51 12
64,672 738 3,950 14,047 7,216 20,564 18,157
[1] Excludes cost of sales and services, which was subtracted from gross receipts from sales and services in computing gross profit from sales and services. Gross profit from sales and services was a component of gross unrelated business income (UBI). Cost of sales and services can include amounts attributable to depreciation, salaries and wages, and certain other deductible items. For exempt organizations reporting positive unrelated business taxable income, cost of sales and services was $709.5 million, 99 percent of which was attributable to tax-exempt corporations. [2] Includes both expenses and deductions reported on Form 990-T, lines 13(B), 29, 31, and 33. [3] Total tax is the regular unrelated business income tax after reduction by any tax credits (foreign tax credit, general business credit, prior-year minimum tax credit, and other allowable credits), plus the "alternative minimum tax," the "proxy" tax on nondeductible lobbying and political expenditures, and "other" taxes. The proxy tax was reported on Form 990-T and was included in total tax; however, it had no connection to the tax on unrelated business income or an organization's involvement in unrelated business activities. For exempt organizations reporting gross UBI above the $1,000 filing threshold, total proxy tax was $2.5 million. [4] The gross unrelated business income (UBI) brackets of "$1,000 under $10,001" and "$10,001 under $100,000" reflect the different filing requirements for organizations with gross UBI of $10,000 or less (not required to report itemized expenses and deductions, or to complete return schedules) and all other Form 990-T filers (required to file a more detailed "complete" return). Organizations with gross UBI below $1,000 were not required to file Form 990-T. NOTE: Detail may not add to totals because of rounding.
110
Unrelated Business Income Tax Returns, 2003
Table 5.—Number of Returns, Gross Unrelated Business Income (UBI), Total Deductions, Unrelated Business Taxable Income (Less Deficit), Unrelated Business Taxable Income, and Total Tax, by Primary Unrelated Business Activity or Industrial Grouping, Tax Year 2003
[All figures are estimates based on samples—money amounts are in thousands of dollars]
Primary unrelated business activity or industrial grouping
Number of returns
Gross unrelated business income (UBI) (2) 8,436,027 43,763 25,770 31,807 126,357 80,595 11,307 670,604 * 5,669 197,556 1,489,201 110,111
Total deductions [1, 2] Number of returns (3) 35,893 218 240 98 70 218 95 1,560 * 41 702 8,424 1,012 Amount (4) 8,412,822 39,478 17,694 32,029 123,965 89,715 4,781 701,935 * 5,796 199,812 1,242,919 75,698
Unrelated business taxable income (less deficit) [3] Number of returns (5) 27,954 142 229 47 64 167 * 92 1,301 * 37 529 7,287 850 (6) 23,204 4,285 8,075 -222 2,392 -9,120 * 6,526 -31,331 * -127 -2,257 246,282 34,413 Amount
Unrelated business taxable inocme [4] Number of returns (7) 15,580 109 228 * 26 * 49 115 * 65 616 * 27 134 6,154 646 (8) 780,149 8,527 9,641 * 1,322 * 3,251 9,383 * 7,472 29,274 * 1,087 21,905 318,616 44,113 Amount
Total tax [5] Number of returns (9) 15,524 107 228 * 26 * 49 116 * 65 601 * 27 135 6,082 646 (10) 220,916 2,741 2,827 * 267 * 899 2,879 * 2,567 8,394 * 289 6,806 86,176 13,347 Amount
(1) All activities and groupings...................... Agriculture, forestry, hunting, and fishing........ Mining.............................................................. Utilities............................................................. Construction.................................................... Manufacturing.................................................. Wholesale trade............................................... Retail trade...................................................... Transportation and warehousing..................... Information....................................................... Finance and insurance, total........................... Unrelated debt-financed activities, other than rental of real estate [6]............ Investment activities of Code section 501(c)(7), (9), and (17) organizations [6,7]................................... Passive income activities with controlled organizations [6]...................... Other finance and insurance ...................... Real estate and rental and leasing, total......... Rental of personal property ........................ Other real estate and rental and leasing..... Professional, scientific, and technical services.................................... Management of companies and enterprises... Administrative and support and waste management and remediation services....... Educational services........................................ Healthcare and social assistance.................... Arts, entertainment, and recreation................. Accommodation and food services.................. Other services................................................. Exploited exempt activities.............................. Not allocable.................................................... 677 26 1,061 4,234 2,629 661 208 * 77 36,064 219 240 98 70 218 95 1,560 * 41 705 8,538 1,012
2,813 333 4,381 6,488 462 6,026 8,181 36
650,442 170,471 558,176 928,481 58,309 870,171 1,757,270 8,966 356,505 22,480 1,258,278 653,987 510,604 173,401 81,410 * 2,015
2,762 333 4,317 6,486 462 6,024 8,181 36 677 26 1,061 4,184 2,629 661 208 * 77
506,216 153,920 507,084 910,698 59,379 851,319 1,779,936 4,954 372,512 23,735 1,320,262 699,286 570,457 188,870 81,924 * 2,063
2,360 285 3,791 5,515 378 5,136 5,101 * 34 537 23 864 2,992 2,212 620 158 *3
144,226 16,551 51,092 17,782 -1,070 18,852 -22,666 * 4,012 -16,007 -1,255 -61,984 -45,299 -59,852 -15,470 -514 * -48
2,091 240 3,177 2,742 166 2,576 2,223 * 32 193 4 296 1,472 704 289 101 0
152,144 31,668 90,691 115,337 3,788 111,548 105,960 * 4,067 22,916 1,753 65,159 24,156 18,878 6,199 5,245 0
2,015 241 3,180 2,751 168 2,584 2,294 * 32 196 5 317 1,456 642 290 103 0
39,508 9,500 23,821 31,539 814 30,725 32,826 * 1,351 7,194 590 21,108 4,733 4,837 1,406 1,487 0
*Estimate should be used with caution because of the small number of sample returns on which it is based. [1] Excludes cost of sales and services, which was subtracted from gross receipts from sales and services in computing gross profit from sales and services. Gross profit from sales and services was a component of gross unrelated business income (UBI). Cost of sales and services can include amounts attributable to depreciation, salaries and wages, and certain other deductible items. For all exempt organizations reporting gross UBI, cost of sales and services was $2.5 billion. [2] Includes both expenses and deductions reported on Form 990-T, lines 13(B), 29, 31, and 33. [3] Excludes data from 8,110 returns with equal amounts of gross UBI and total deductions. [4] Includes data from returns with positive amounts of unrelated business taxable income only. [5] Total tax is the regular unrelated business income tax after reduction by any tax credits (foreign tax credit, general business credit, prior-year minimum tax credit, and other allowable credits), plus the "alternative minimum tax," the "proxy" tax on nondeductible lobbying and political expenditures, and "other" taxes. The proxy tax was reported on Form 990-T and was included in total tax; however, it had no connection to the tax on unrelated business income or an organization's involvement in unrelated business activities. For exempt organizations reporting gross UBI above the $1,000 filing threshold, total proxy tax was $3.0 million. [6] See the Explanation of Selected Terms section of this article for definitions of Unrelated Debt-Financed Income, Investment Income (Less Loss), and Income from Controlled Organizations. [7] Section 501(c)(7) organizations are social and recreational clubs; section 501(c)(9) organizations are voluntary employees' beneficiary associations; and section 501(c)(17) organizations are supplemental unemployment benefit trusts. NOTE: Detail may not add to totals because of rounding.
111
Unrelated Business Income Tax Returns, 2003
[All figures are estimates based on samples—money amounts are in thousands of dollars]
Table 6.—Sources of Gross Unrelated Business Income (UBI), by Size of Gross UBI, Tax Year 2003
Gross unrelated business income (UBI) Number of returns (1) 36,064 12,681 23,383 14,454 6,471 1,155 1,044 258 Sources of gross unrelated business income (UBI) [1] Gross profit (less loss) from sales and services Number of returns (3) 15,379 2,536 12,842 7,162 4,030 775 693 182 Amount (4) 4,501,523 10,051 4,491,472 231,104 747,750 437,840 1,167,718 1,907,060 Capital gain net income Number of returns (5) 1,178 520 658 341 194 42 58 22 Amount (6) 148,657 1,508 147,149 9,343 23,421 10,274 49,163 54,947
Size of gross unrelated business income (UBI)
Amount (2) 8,436,027 52,818 8,383,209 540,656 1,392,866 804,835 2,110,620 3,534,231
Total...................................................................... $1,000 under $10,001 [2]......................................... $10,001 or more, total [2,3]..................................... $10,001 under $100,000....................................... $100,000 under $500,000..................................... $500,000 under $1,000,000.................................. $1,000,000 under $5,000,000............................... $5,000,000 or more...............................................
Sources of gross unrelated business income (UBI) [1]—Continued Net capital loss Size of gross unrelated business income (UBI) of returns (7) Total...................................................................... $1,000 under $10,001 [2]......................................... $10,001 or more, total [2,3]..................................... $10,001 under $100,000....................................... $100,000 under $500,000..................................... $500,000 under $1,000,000.................................. $1,000,000 under $5,000,000............................... $5,000,000 or more............................................... 211 * 100 111 * 48 30 10 19 4 Rental Size of gross unrelated business income (UBI) income [5] Number of returns (13) 4,599 1,360 3,238 2,176 800 130 105 28 Amount (14) 274,300 6,231 268,069 57,284 71,528 34,856 52,831 51,569 (trusts only) Number Amount (8) 612 * 301 311 * 119 89 30 61 12 Net gain (less loss), sales of noncapital assets [4] Number of returns (9) 325 50 275 160 47 27 26 15 Unrelated debtfinanced income Number of Amount returns (15) (16) 3,256 905 2,352 1,471 623 105 123 29 407,164 3,342 403,821 44,373 87,056 48,937 104,871 118,584 Amount (10) 13,073 8 13,065 1,802 96 664 7,196 3,307 Income (less loss) from partnerships and S corporations Number of returns (11) 4,806 2,986 1,820 936 521 117 174 72 Amount (12) 301,520 7,589 293,932 21,909 59,147 25,414 65,514 121,947
Sources of gross unrelated business income (UBI) [1]—Continued Investment income (less loss) [6] Number of Amount returns (17) (18) 5,193 2,202 2,991 1,658 1,041 178 94 20 642,120 7,009 635,111 16,511 45,527 27,956 86,279 458,838
Total...................................................................... $1,000 under $10,001 [2]......................................... $10,001 or more, total [2,3]..................................... $10,001 under $100,000....................................... $100,000 under $500,000..................................... $500,000 under $1,000,000.................................. $1,000,000 under $5,000,000............................... $5,000,000 or more...............................................
Footnotes at end of table.
112
Unrelated Business Income Tax Returns, 2003
[All figures are estimates based on samples—money amounts are in thousands of dollars]
Table 6.—Sources of Gross Unrelated Business Income (UBI), by Size of Gross UBI, Tax Year 2003— Continued
Sources of gross unrelated business income (UBI) [1]—Continued Income from Size of gross unrelated business income (UBI) controlled organizations [7] Number of returns (19) Total............................................ 906 * 127 780 312 304 60 70 34 (20) 206,355 * 243 206,111 8,214 24,776 14,967 56,912 101,242 Amount Exploited exempt activity income, except advertising Number of returns (21) 876 * 165 712 367 184 63 76 21 (22) 151,591 * 820 150,772 8,258 18,334 15,416 54,462 54,301 Amount Number of returns (23) 8,346 3,227 5,119 3,060 1,439 275 277 67 (24) 1,280,994 13,673 1,267,321 88,043 220,851 135,898 310,664 511,866 Amount Advertising income of returns (25) 4,737 987 3,750 2,024 1,248 208 221 49 (26) 509,342 2,645 506,697 53,933 94,469 52,642 155,071 150,582 Other income (less loss) Number Amount
$1,000 under $10,001 [2]............... $10,001 or more, total [2,3]........... $10,001 under $100,000............. $100,000 under $500,000........... $500,000 under $1,000,000........ $1,000,000 under $5,000,000..... $5,000,000 or more.....................
* Estimate should be used with caution because of the small number of sample returns on which it is based. [1] For definitions of the sources of gross unrelated business income, see the Explanation of Selected Terms section of this article. [2] The gross unrelated business income (UBI) brackets of "$1,000 under $10,001" and "$10,001 under $100,000" reflect the different filing requirements for organizations with gross UBI of $10,000 or less (not required to report itemized expenses and deductions, or to complete return schedules) and all other Form 990-T filers (required to file a more detailed "complete" return). Organizations with gross UBI below $1,000 were not required to file Form 990-T. [3] All organizations were required to report each income item, as shown in columns 3 through 26. However, only organizations with gross UBI over $10,000 were required to report each deduction shown in columns 14 through 45, 48, 49, and 54 through 59 of Table 7. Income totals for these larger organizations with gross UBI over $10,000 are shown in order to facilitate comparison with Table 7. [4] Property other than capital assets generally included property of a business nature, in contrast to personal property and investment property, which were capital assets. [5] Income from real property and personal property leased with real property. [6] Reported by Internal Revenue Code section 501(c)(7) social and recreational clubs, section 501(c)(9) voluntary employees' beneficiary associations, and section 501(c)(17) supplemental unemployment benefit trusts only. [7] Annuities, interest, rents, and royalties. NOTE: Detail may not add to totals because of rounding.
113
Unrelated Business Income Tax Returns, 2003
[All figures are estimates based on samples —money amounts are in thousands of dollars]
Table 7.—Unrelated Business Income Tax Returns: Types of Deductions by Size of Gross Unrelated Business Income (UBI), Tax Year 2003
All organizations Size of gross unrelated business income (UBI) Total number of returns (1) 36,064 12,681 14,454 6,471 1,155 1,044 258 Total deductions [1, 2] Number of returns (2) 35,893 12,531 14,450 6,456 1,154 1,044 258 Organizations with gross unrelated business income (UBI) of $1,000 under $10,001 [3] Total deductions [2, 4] Number of Amount returns (4) (5) 12,531 52,266 12,531 52,266 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A Net operating loss deduction Number of Amount returns (6) (7) 866 1,576 866 1,576 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A Specific deduction Number of returns (8) 7,736 7,736 N/A N/A N/A N/A N/A Amount (9) 7,234 7,234 N/A N/A N/A N/A N/A
Amount (3) 8,412,822 52,266 555,003 1,406,641 822,327 2,089,962 3,486,623
Total............................................ $1,000 under $10,001 [3]................. $10,001 under $100,000 [3]............. $100,000 under $500,000................ $500,000 under $1,000,000............. $1,000,000 under $5,000,000.......... $5,000,000 or more.........................
Organizations with gross unrelated business income (UBI) of $10,001 or more [3]—Continued Deductions directly connected with UBI Size of gross unrelated business income (UBI) Total deductions [2, 5] Number of returns (10) 23,362 N/A 14,450 6,456 1,154 1,044 258 Total Number of returns (12) 22,107 N/A 13,484 6,223 1,130 1,021 249 Allocable to rental income [6] Number of Amount returns (14) (15) 1,799 185,905 N/A N/A 1,264 31,737 380 49,137 67 21,637 68 34,069 21 49,325 Allocable to unrelated debt-financed income [6] Number of returns (16) 2,226 N/A 1,415 567 100 117 27 Amount (17) 409,308 N/A 47,675 96,286 46,051 112,161 107,134 Allocable to investment income [6,7] Number of returns (18) 832 N/A 261 409 105 52 5
Amount (11) 8,360,556 N/A 555,003 1,406,641 822,327 2,089,962 3,486,623
Amount (13) 7,768,739 N/A 523,155 1,325,064 765,875 1,966,286 3,188,358
Total............................................ $1,000 under $10,001 [3]................. $10,001 under $100,000 [3]............. $100,000 under $500,000................ $500,000 under $1,000,000............. $1,000,000 under $5,000,000.......... $5,000,000 or more.........................
Organizations with gross unrelated business income (UBI) of $10,001 or more [3]—Continued Deductions directly connected with UBI—Continued Allocable to investment Allocable to income from income [6, controlled organizations [6] 7]—continued Amount (19) 251,296 N/A 1,081 6,456 3,332 2,529 237,898 Number of returns (20) 494 N/A 243 140 39 45 27 Amount (21) 144,721 N/A 6,307 16,699 10,100 29,968 81,647 Allocable to exploited exempt activity income, except advertising [6] Number of returns (22) 641 N/A 343 152 59 68 19 Amount (23) 141,852 N/A 8,139 16,325 12,908 53,242 51,239 Direct advertising costs [6] Number of returns (24) 4,716 N/A 2,826 1,311 257 260 61 Compensation of officers, directors, and trustees Number of returns (26) 1,812 N/A 841 729 101 112 29
Size of gross unrelated business income (UBI)
Amount (25) 920,394 N/A 72,688 156,432 99,433 220,743 371,099
Amount (27) 57,013 N/A 7,831 16,626 4,640 8,897 19,019
Total............................................ $1,000 under $10,001 [3]................. $10,001 under $100,000 [3]............. $100,000 under $500,000................ $500,000 under $1,000,000............. $1,000,000 under $5,000,000.......... $5,000,000 or more.........................
Organizations with gross unrelated business income (UBI) of $10,001 or more [3]—Continued Deductions directly connected with UBI—Continued Size of gross unrelated business income (UBI) Salaries and wages Number of returns (28) 10,186 N/A 5,118 3,602 689 619 158 Repairs and maintenance Number of returns (30) 7,007 N/A 3,487 2,511 489 416 105 Bad debts Number of returns (32) 757 N/A 140 304 126 131 56 Interest Number of returns (34) 2,873 N/A 1,277 1,166 225 156 49
Amount (29) 1,556,878 N/A 125,102 350,519 192,088 433,790 455,379
Amount (31) 108,065 N/A 13,119 34,487 14,932 24,224 21,303
Amount (33) 47,372 N/A 360 1,236 6,829 11,689 27,257
Amount (35) 55,698 N/A 6,954 14,858 9,512 14,621 9,752
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Total.................................................................... $1,000 under $10,001 [3]........................................ $10,001 under $100,000 [3].................................... $100,000 under $500,000....................................... $500,000 under $1,000,000.................................... $1,000,000 under $5,000,000................................. $5,000,000 or more.................................................
Footnotes at end of table.
Unrelated Business Income Tax Returns, 2003
[All figures are estimates based on samples —money amounts are in thousands of dollars]
Table 7.—Unrelated Business Income Tax Returns: Types of Deductions by Size of Gross Unrelated Business Income (UBI), Tax Year 2003—Continued
Organizations with gross unrelated business income (UBI) of $10,001 or more [3]—Continued Deductions directly connected with UBI—Continued Size of gross unrelated business income (UBI) Taxes and licenses paid deduction Number of returns (36) 10,424 N/A 5,742 3,517 572 472 120 Amount (37) 170,153 N/A 20,414 67,235 28,124 32,830 21,549 Depreciation Number of returns (38) 7,704 N/A 3,977 2,626 481 485 135 Amount (39) 249,904 N/A 20,711 60,329 32,449 64,244 72,170 Depletion Number of returns (40) 122 N/A * 105 *8 *3 ** 5 ** Amount (41) 2,756 N/A * 621 * 327 * 104 ** 1,704 ** Contributions to deferred compensation plans Number of Amount returns (42) (43) 1,047 11,231 N/A N/A 381 329 466 2,263 109 1,549 ** 90 ** 7,090 ** **
Total.............................................................. $1,000 under $10,001 [3]................................... $10,001 under $100,000 [3]............................... $100,000 under $500,000.................................. $500,000 under $1,000,000............................... $1,000,000 under $5,000,000............................ $5,000,000 or more...........................................
Organizations with gross unrelated business income (UBI) of $10,001 or more [3]—Continued Deductions not directly connected with UBI Size of gross unrelated business income (UBI) Contributions to employee benefit programs Number of Amount returns (44) (45) 5,259 225,143 N/A N/A 2,223 9,333 1,954 31,526 472 24,241 478 69,268 132 90,776 Net operating loss deduction Number of Amount returns (46) (47) 3,746 175,799 N/A N/A 2,285 20,174 1,004 31,040 192 17,649 206 52,269 59 54,667 Other deductions Number of returns (48) 14,050 N/A 7,737 4,469 854 787 203 Amount (49) 3,055,253 N/A 130,580 373,284 240,297 796,608 1,514,485 Total Number of returns (50) 11,686 N/A 7,182 3,289 579 496 139 Amount (51) 591,817 N/A 31,847 81,576 56,452 123,676 298,265
Total.............................................................. $1,000 under $10,001 [3]................................... $10,001 under $100,000 [3]............................... $100,000 under $500,000.................................. $500,000 under $1,000,000............................... $1,000,000 under $5,000,000............................ $5,000,000 or more...........................................
Organizations with gross unrelated business income (UBI) of $10,001 or more [3]—Continued Deductions not directly connected with UBI—Continued Size of gross unrelated business income (UBI) Specific deduction Number of returns (52) Total.............................................................. $1,000 under $10,001 [3]................................... $10,001 under $100,000 [3]............................... $100,000 under $500,000.................................. $500,000 under $1,000,000............................... $1,000,000 under $5,000,000............................ $5,000,000 or more........................................... 9,380 N/A 5,926 2,564 448 348 93 Amount (53) 8,901 N/A 5,565 2,454 443 346 93 Charitable contributions Number of returns (54) 1,775 N/A 972 547 119 88 49 Amount (55) 43,669 N/A 4,377 7,760 10,592 6,110 14,830 Set-asides [7] Number of returns (56) 361 N/A * 168 130 23 29 10 Amount (57) 252,108 N/A * 3,550 19,396 14,868 41,634 172,660 Excess exempt-activity expenses [8] Number of returns (58) 2,224 N/A 1,138 715 152 174 45 Amount (59) 287,139 N/A 18,355 51,966 30,549 75,587 110,683
* Estimate should be used with caution because of the small number of sample returns on which it is based. **Data in adjacent size classes are combined to avoid disclosure of information about specific taxpayers. N/A - Not applicable. [1] Excludes cost of sales and services, which was subtracted from gross receipts from sales and services in computing gross profit from sales and services. Gross profit from sales and services was a component of gross unrelated business income (UBI). Cost of sales and services can include amounts attributable to depreciation, salaries and wages, and certain other deductible items. For all exempt organizations reporting gross UBI, cost of sales and services was $2.5 billion. [2] Includes both expenses and deductions reported on Form 990-T, lines 13(B), 29, 31, and 33, respectively. [3] Organizations with gross UBI between $1,000 (the filing threshold) and $10,000 were required to report only totals for expenses and deductions (except for the specific deduction and net operating loss deduction, which all organizations reported separately). Organizations with gross UBI over $10,000 were required to report each expense and deduction item separately, as shown in columns 14 through 45, 48, 49, and 54 through 59. [4] Excludes $51.5 million of cost of sales and services reported by organizations with gross UBI of $10,000 or less. See footnote [1] for explanation. [5] Excludes $2.5 billion of cost of sales and services reported by organizations with gross UBI over $10,000. See footnote [1] for explanation. [6] This deduction was required to be reported as a lump-sum total only and may have included component deductions that were of the same type shown elsewhere in this table. For example, if deductions "allocable to rental income" included depreciation, then that amount of depreciation would not be included in the separately reported item, depreciation. Therefore, the total amount shown for some of the separately reported deductions may be understated. [7] Reported by Internal Revenue Code section 501(c)(7) social and recreational clubs, section 501(c)(9) voluntary employees' beneficiary associations, and section 501(c)(17) supplemental unemployment benefit trusts only. [8] Includes excess exempt-activity expenses from Form 990-T, Schedule I, and excess readership costs from Form 990-T, Schedule J. NOTE: Detail may not add to totals because of rounding.
115