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

What UBIT is
UBIT is income earned by an organization from a regularly carried-on business that is not substantially related to the organization’s exempt purpose. Just because the organization uses the profits from the business to fulfill its mission, that doesn’t make the business substantially related to the organization’s exempt purposes. For example, even though all of the profits from a museum’s gift shop are used to support the museum, different income-tax rules apply to various types of merchandise. The museum will not be subject to UBIT on income from the sale of items such as posters of museum paintings, but it will be subject to UBIT from the sale of items not specifically related to the museum, such as sunglasses, mugs and other gift items.