Unrelated business income tax (UBIT) services for nonprofits.
Screening revenue streams for tax exposure before it becomes a filing surprise or a threat to exempt status.
18+
years of nonprofit-exclusive practice
500+
nonprofit clients served
60+
nonprofit professionals
95%+
client retention rate
Recurring screening,
not one-time.
We screen each of your revenue streams individually against the IRS’s three-part test, prepare Form 990-T filings where unrelated business income applies, and reassess exposure on a recurring cycle as your programs and revenue activities evolve.
What revenue streams do nonprofits most often misjudge?
Facility rentals, advertising revenue in publications or on websites, and fees from programs adjacent to the core mission are the activities nonprofits most commonly misjudge on UBIT. The mistake usually is not carelessness. These activities genuinely look mission-supportive on the surface, and the IRS’s test for whether they are taxable is not intuitive without specific expertise.
The risk compounds because these revenue streams often grow gradually. An organization might rent unused space occasionally at first, then more regularly as the arrangement proves reliable, crossing from incidental activity into something “regularly carried on” without anyone flagging the shift. By the time a UBIT question surfaces, often during an audit or a new controller’s first close, multiple years of unreported liability may already exist.
What actually triggers UBIT?
The IRS applies a three-part test. All three conditions must be met for income to be taxable as unrelated business income:
01
The activity is a trade or business.
02
The activity is regularly carried on.
03
The activity is not substantially related to the organization’s exempt purpose.
The third prong is where most judgment calls happen. An activity can be revenue-generating and mission-adjacent without qualifying as substantially related. The test asks whether the activity itself contributes importantly to the exempt purpose, not whether the revenue it produces funds exempt activities.
What does UBIT screening include?
Activity-by-activity screening.
Each of an organization’s revenue streams is evaluated individually against the three-part test. A blanket assessment across all revenue is not sufficient because UBIT applies at the activity level, and one organization can have both taxable and non-taxable revenue from activities that look superficially similar.
Sponsorship vs. advertising analysis.
Qualified corporate sponsorship payments, where the sponsor receives acknowledgment but not substantial advertising benefits, are generally excluded from UBIT. The distinction between simple acknowledgment and taxable advertising depends on exactly what the sponsor receives in exchange. We evaluate sponsorship arrangements individually because the line is fact-specific.
Royalty & licensing review.
Royalty income is generally excluded from UBIT, but arrangements that involve services beyond the licensing of intellectual property can reclassify the income as taxable. We review licensing and royalty arrangements to confirm they qualify for the exclusion.
Debt-financed income analysis.
Income from property acquired or improved with borrowed funds may be subject to UBIT even if the underlying activity is otherwise exempt. We identify debt-financed income exposure and calculate the taxable portion where it applies.
Form 990-T preparation.
When UBIT applies, we prepare the required return, including the tax calculation and any applicable deductions directly connected to the unrelated activity.
Ongoing monitoring.
We reassess revenue streams on a recurring basis, since a new program, partnership, or operational change can shift an activity’s UBIT status without anyone recognizing it at the time.
How do we screen for UBIT exposure?
01
Revenue stream inventory.
We catalog every distinct revenue source the organization has, including those that seem clearly mission-related.
02
Three-part test application.
We apply the trade-or-business, regularly-carried-on, and substantially-related tests to each stream individually.
03
Exclusion review.
We evaluate whether any applicable exclusions (volunteer labor, donated merchandise, passive investment income, qualified sponsorship) apply to activities that otherwise meet the test.
04
Form 990-T preparation.
Where UBIT applies, we prepare the return and calculate the tax owed.
05
Ongoing monitoring cadence.
We reassess revenue streams on a recurring cycle, catching gradual shifts in activity volume or character before they create multi-year exposure.
Where the generalist gap is sharpest.
UBIT is where the gap between a nonprofit-exclusive firm and a generalist is sharpest outside of audit. The three-part test’s “substantially related” prong turns on judgment about how an activity actually connects to exempt purpose, and that judgment comes from having made it many times before. A generalist firm applying for-profit tax instincts to this question misjudges it frequently enough that UBIT misapplication is a recognized pattern in the sector.
Han Group screens for UBIT exposure annually across every client engagement, as part of standard tax practice. Running the screen annually catches the gradual-growth pattern: an activity that was clearly incidental two years ago may have quietly become “regularly carried on” today, and only recurring review catches that shift before it compounds.
Related services.
Form 990 preparation & filing.
Full-return preparation and public-facing review of the filing that donors, journalists, and rating agencies can search.
Tax planning.
Forward-looking tax strategy that evaluates exposure from new programs, revenue streams, and structural changes before decisions close.
Tax compliance.
Federal and state filing obligations managed on a continuous calendar across every jurisdiction where you operate.
Financial audits.
Independent audit of your financial statements, scoped to your funding sources and delivered with a board presentation of findings.
Screen your revenue streams before the IRS does.
If your organization generates revenue from activities beyond direct mission work, a partner is ready to evaluate where UBIT exposure exists and how to address it.