On the Record: All that Glitters Isn't Tax Exempt

Even though an organization is exempt from federal income tax, that doesn’t mean it never pays income tax. If the college retains the ranch or the museum keeps controlling interest in the business, the income generated by the gifts most likely will be characterized as unrelated business taxable income. As a consequence, the college or museum will be subject to unrelated business income tax (UBIT) at the regular corporate or trust rate on income it receives from the ranch or business.