UBIT, unrelated business income taxes, is one of those acronyms that generally provides a bit of nervousness when used in nonprofit circles. A UBIT is in fact specific to nonprofits and is applied when a nonprofit generates substantive levels of revenue from non-mission related activities. It is also fact that not many nonprofits have generated non-mission related revenues to the degree that the issue comes into play. The real problem is not the paying of taxes as much as getting to a scale where the nonprofit might lose its tax exempt status. That of course is an even rarer incident and there are solutions (like spinning off the enterprise).
Meanwhile however, there are actually nonprofits that have some really deep pockets (lots of cash) and have figured out how to avoid the UBIT by making off-shore investments. Yes, I know, many would welcome this situation (to have this level of resources) but doing anything to avoid taxes can sometimes bring unwanted attention.
Apparently, the Boys & Girls Club, an institution which has some pretty close ties to the Federal Government, has been very clever with its investments in addition to doing a few other things that tend to irk stalwart Senators like Senator Grassley.
You can read the details at The Nonprofit Quarterly but more importantly a good lesson is that it isn't easy to have your cake and eat it too -- not as a nonprofit; not as a nonprofit with close economic ties to the government; and, not in America.
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