UBI Tax Reporting Violations

The Exempt Organization (EO) arm of the IRS is examining a “statistically valid sample” of nonprofits this year to see if those reporting substantial gross unrelated business income (UBI) for the last three years also are reporting income tax due for those years.

Last year the EO completed compliance checks of 400 organizations that had reported taxable UBI activities on their Forms 990 but hadn’t filed Form 990-T, “Exempt Organization Business Income Tax Return.” The investigation resulted in the EO securing about 140 delinquent returns and more than $260,000 in tax payments. The agency says it’s concerned again this year about whether nonprofits are accurately reporting their sources of UBI and correctly allocating and deducting the expenses associated with it.