Friday, February 29, 2008

Charities Engaging in More Unrelated Business Activity

We may safely assume that during a time of economic downturn, stakeholders tighten their belts and give less to charities.  As a result, charities engage in more business activity to hold them over until donations flow again.  That speculation seems to have been concerned by a recent article in the 2008 Winter Statistics of Income Bulletin.  The article states that unrelated business income tax liability rose a whopping 66% from 2003 to 2004.  The SOI articles are always very well written, by the way.  Wouldn't it be nice if we all just flooded the EO Division with emails thanking  them for their work.  Anyway, here is an abstract from the report:

Tax-exempt organizations produced a total of $9.5 billion of gross unrelated business income (UBI) for 2004, nearly 13 percent more than the 2003 amount. After offsetting total gross UBI with $9.0 billion of total deductions, the resulting UBTI (less deficit) for 2004 was $0.5 billion. Positive UBTI amounted to $1.3 billion for 2004, a 65-percent increase over 2003, and the associated UBIT was $364.6 million. After adjusting UBIT with certain credits and other taxes, the total tax reported on Form 990‑T was $367.7 million.


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