Nonprofit Business Activity and the Unrelated Business Income Tax / James R. Hines, Jr..

Format:

Book

Author/Creator:

Hines, James R, Jr.

Contributor:

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w6820.

NBER working paper series no. w6820

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2000.

Summary:

American nonprofit organizations are generally exempt from federal income tax, with the exception that profits earned from activities that are subject to the Unrelated Business Income Tax (UBIT). The UBIT is intended to prevent nonprofits and taxable for-profit firms, and also to prevent erosion of the federal tax base through tax-motivated transactions between taxable and tax-exempt entities. The evidence indicates that American nonprofit organizations engage in very little unrelated business activity, paying aggregate UBIT of less than $200 million annually. Large nonprofit organizations, and those with pressing financial needs due to high program-related expenses and low receipts of contributions and government grants, are the most likely to have unrelated business income. The same organizational characteristics are not associated with earning income from inventory sales that are nonprofits incur important organizational costs in undertaking unrelated business activity, since unrelated business income is concentrated among organizations facing the strongest financial pressures. This, in turn, carries implications for the efficiency of the UBIT as a source of tax revenue and for the need to tax the business income of nonprofit organizations in order to prevent

Notes:

Print version record

November 2000.