5.4. UNRELATED BUSINESS INCOME TAX (UBIT)
The University of Texas at Austin is subject to a federal income tax, known as the Unrelated Business Income Tax (UBIT), when it engages in activities that are deemed, under federal law, to be unrelated to its mission. Any unrelated trade or business that is regularly carried on will be subject to UBIT, unless an exception applies, even if the profits from such activity are used to fund mission essential purposes like education, patient care, and research.
Some common examples of activities that generate UBIT include:
- Sponsorship and advertising income from conferences, events, games, programs, webpages, social media, emails, or publications
- Sale of goods or services to any external customer (other than tuition)
- The license or rental of real (space) or personal (equipment) property
- A contractual relationship with an external party that shares revenue or allows the external party to collect revenues for UT
- Customized training for any external customer
- Consulting or advising services provided to any external customer
To determine whether a specific activity is subject to UBIT, the following three-prong test is initially applied to an activity:
- Does the activity importantly contribute to UT Austin’s mission?
- Is the activity a trade or business with an intent to profit, or are costs simply trying to be covered?
- Is the activity conducted regularly, meaning it operates with a frequency and continuity of a similar commercial activity?
Although these questions appear simple, each must be answered in light of prevailing legal standards determined under federal statutes, regulations, and court decisions.
A Non-Financial Questionnaire must be completed to determine whether a CSU is engaging in an activity that is subject to UBIT. Send the completed Non-Financial Questionnaires to the Tax Services department of Accounting and Financial Management at firstname.lastname@example.org and contact them with any additional questions.
For additional information, see the University of Texas System’s policy on UBIT—UTS 103 Unrelated Business Income Tax.
Part 5. Sales of Goods and Services - Table of Contents