Guide · Form 990-T
Understanding UBIT and Form 990-T
When income from a trade or business becomes taxable to an exempt organization, and how the silo rules affect the way activities are reported.
October 8, 2025 · 8 min read
Unrelated business income tax applies when an exempt organization regularly carries on a trade or business that is not substantially related to its exempt purpose. Where gross unrelated business income is $1,000 or more, Form 990-T is generally required.
The three-part test
An activity is generally treated as an unrelated trade or business when all three conditions are met.
- It is a trade or business carried on for the production of income
- It is regularly carried on
- It is not substantially related to the organization's exempt purpose
Siloing under Section 512(a)(6)
Organizations with more than one unrelated trade or business must compute income and loss separately for each activity. A loss in one silo generally cannot offset income in another, which changes how net operating losses are tracked.
Frequent exclusions
Many revenue streams that look commercial are statutorily excluded — including certain passive investment income, activities conducted substantially by volunteers, and qualified sponsorship payments that do not involve substantial return benefits.
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