CSU Unrelated Business Income Tax
|Definition:||Unrelated business income is the gross income derived from any business that is regularly carried on, and not substantially related to, the organization's exempt purpose or function. The unrelated business income tax policy of the California State University (CSU) is designed to facilitate the timely and accurate completion of the Unrelated Business Income Tax Worksheet which must be sent to the Office of the Chancellor no later than October 15 of each year.|
|Authority:||The trustees of the California State University authorize the universities to collect the information necessary to prepare a complete and accurate Unrelated Business Income Tax Worksheet under Internal Revenue Code Section 1.6012-2(e). listed in Section A subject to limitations described in Section B of the procedures immediately following this policy statement.|
|Scope:||This policy and any related procedures apply to all areas and members of The California State University.|
|Responsible Division:||Finance & Administrative Services|
|Signature Page/PDF:||View Signatures for CSU Unrelated Business Income Tax Policy|
I. UNRELATED BUSINESS INCOME TAX WORKSHEET
California State University San Marcos shall gather the necessary information for the UBIT Worksheet which, when complete, will be forwarded to the Chancellor's Office. The $1,000 minimum taxable income threshold required to file an unrelated business income tax return should be ignored since a systemwide consolidated tax return will be filed. This includes all unrelated business income.
A. Unrelated trade or business income is the gross income derived from any trade or business that is regularly carried on, and not substantially related to, the organization's exempt purpose or function. For an Internal Revenue Code Section 511(a)(2)(B) State college or university, this is from activities not substantially related to exercising or performing any purpose or function described in IRC Section 501(c)(3).
An unrelated trade or business does not include:
- A trade or business in which substantially all the work is performed for the organization without compensation; or
- A trade or business that is carried on by an IRC Section 501(c)(3) organization mainly for the convenience of its members, students, officers, or employees; or
- A trade or business that consists of qualified public entertainment activities regularly carried on by an IRC Section 501(c)(3) organization as one of its substantial exempt purposes.
B. A trade or business is any activity carried on for the production of income from selling goods or performing services. An activity does not lose its identity as a trade or business merely because it is:
- Carried on within a larger group of similar activities which may or may not be related to the exempt purpose of the organization. If, however, an activity carried on for profit is an unrelated trade or business, no part of it can be excluded from this classification merely because it does not result in profit.
- Not substantially related to means that the activity that produces the income does not contribute importantly to the exempt purposes of the organization, other than the need for funds, etc. Whether an activity contributes importantly depends in each case on the facts involved.
C. Taxable income is calculated based on gross revenue less any and all operating costs, inclusive of overhead and administrative costs.
II. UNRELATED BUSINESS INCOME TAX REPORTING REQUIREMENTS
The CSU San Marcos UBIT accountant shall forward the UBIT Worksheet to the Chancellor's Office no later than October 15 to facilitate the preparation and filing of the systemwide Form 990T tax return. Once the tax liability has been calculated, the Chancellor's Office will send a tax bill to the various campuses. Campuses must remit taxes due immediately upon receipt of their bill. These funds must be received in time for the finalized return to be postmarked before the annual November 15 due date.