UNRELATED BUSINESS INCOME TAX – UBIT
Florida International University is exempt from taxation under Section 115 of the Internal
Revenue Code. However, the University is required to pay Federal income tax on net income
from activities unrelated to the exempt mission of the University: education, research and public
It is very important that all unrelated business activities of the University be reported on the
Federal tax return. The Internal Revenue Service can and will assess costly penalties and interest
charges for underpayment of taxes.
Three elements must be considered to determine if an activity is subject to unrelated business
income tax. The activity must:
1. Be conducted as a trade or business
2. Be regularly carried on
3. Not be substantially related to the tax exempt mission of the University
Trade or Business: Includes any activity carried on for the production of income from
selling goods or performing services.
Regularly Carried On: UBIT applies only to a business activity that is regularly carried
on, as opposed to transactions that are sporadic or infrequent. An activity is considered
regularly carried on if it is conducted with a frequency and manner comparable to the
conduct of a similar activity by a taxed business.
Not Substantially Related: The activity must not be substantially related to the exempt
mission of the University. To decide if an activity is related or unrelated, determine the
nature of the activity and how essential it is to accomplish the mission of the University:
education, research and public service.
The following are examples of activities that are not related to the mission of the
University and subject to unrelated business income tax:
1. Computer time sold to an outside company
2. Income from advertising placed by a company during a baseball game (banners,
3. Sale of mailing lists
4. Sale of pop records by the bookstore
5. Gift shop sales
6. Sale of advertising space in an EO Journal
7. Sales of art objects at exhibits
8. Meetings, conferences, and seminars that are non-educational
9. On-line stores linked to the FIU web site
10. A hyperlink from the FIU web site to a sponsor’s web site where an endorsement
appears by FIU for the sponsor’s product.
11. Commercially sponsored scientific research if the results are not made available to
12. Rental of apartments to the general public financed by tax exempt bonds
13. Rental of sports facilities such as stadiums, soccer fields, etc.
14. A travel tour program operated by the alumni association
15. Rental payments for the lease of space on antenna towers and transmission facilities.
16. Summer Sports Camps that are not part of educational programs offered by the
17. Exclusive Provider Arrangements where FIU receives a substantial return benefit
that has a fair market value of more than 2 percent of the entire payment.
The following are examples of activities that are related to the mission of the University:
1. Computer time sold to university departments
2. Income from advertising placed on the University newspaper when the newspaper is
run by the students as part of an educational program
3. Sale of books and class material by the bookstore
4. Meetings, conferences and seminars where education or training is provided by FIU.
However, tangible personal property provided as part of the meeting packages can be
unrelated (i.e. audio/visual equipment).
Certain exceptions exist to the criteria set forth above. An activity that would ordinarily be
considered unrelated and subject to income tax is exempt from UBIT if any of the conditions
listed below exists:
Member Convenience: An unrelated activity conducted by the University for the benefit
of its members (students, faculty, staff) is not subject to UBIT unless income is generated
from sales to non-members. In this case, only non-members sales are taxed. Examples
of activities that are not subject to UBIT are:
1. Laundry facility for the students
2. Hair cutting salon for students and university employees
Volunteer Work: UBIT does not apply to income from an activity in which substantially
all of the work is performed without compensation.
Student Services: UBIT does not apply to income from an activity in which students
perform, in general, 50 percent or more of the services as part of an educational
Rental of Real Property: In general, the rental of real property is not subject to
unrelated business income tax unless personal services are rendered that are not
customarily or usual to the rental of space.