Technology Commercialization: Russian Challenges, American Lessons (1998)
Chapter: Appendix M: University Unrelated Business Income Policy
Appendix M
Unrelated Business Income Policy of the University of North Carolina
Overview
Each year the University is required to file an Exempt Organization Business Income Tax Return with the Internal Revenue Service reporting any unrelated business income generated by the activities of its academic and support units. The Internal Revenue Code states that a college or university is generally deemed to have unrelated business taxable income when it realizes gross income from any regularly conducted trade or business that is not substantially related to its educational and other exempt purposes.
Definitions
A trade or business is an activity carried on to produce income from the sale of goods or the performance of services. A specific business activity will be considered to be regularly carried on if it is conducted with a frequency and manner comparable to that of the same or similar activity by a taxable organization. Not substantially related means the activity that produces the income does not contribute importantly to the exempt purpose of the university. Any business activity conducted by a college or university primarily for the convenience of its faculty, other employees, and/or students is not taxable, regardless of the nature of the activity.
Annual Review
Each year the Controller's Office reviews all areas where unrelated business income existed or had significant potential to exist in the preceding year. All departments are asked to notify the Controller's Office of any new programs that may generate revenues that fit the definition of unrelated business income. The following are examples of potential unrelated business income generating activities.
Examples
- Any form of advertising that generates revenue for the University.
- Rental of real property if services are provided to the renter or if the property is debt financed.
- Rental of personal property (equipment, computer time)
- Rental or sale of mailing lists
- Sale of any goods or services to non-University persons or entities.
Tax Liability
The presence of these activities does not necessarily mean that a tax liability exists. It may be determined that the activity is not subject to unrelated business income tax, or if it is a taxable activity, the revenue may generally be offset by the expense incurred.
Source: University of North Carolina Accounting Services, 1995
