Does a Non-Profit 501(c)(3) Realize Unrelated Business Taxable Income (UBTI) For Advertising?

Non-profit organizations which are exempt from income tax under 501(a) are subject to tax on unrelated business income. 501(b), 511. Unrelated business income is gross income derived by any organization from any unrelated trade or business, regularly carried on by it, less the deductions allowed. 512. An unrelated trade or business is a trade or business which is not substantially related (aside from the need of such organization for income or funds) to the purpose of the organization. 513. However, unrelated trade or business does not include a trade or business where substantially all the work is performed for the organization without compensation. 513(a)(1). See Rev. Rul. 75-201, 1975-1 CB 164.

The sale of advertising in a publication published by an exempt organization is an unrelated trade or business when the advertising activity is regularly carried on. Reg. 1.512(a)-1(f)(1). See also Rev. Rul. 73-424, 1973-2 CB 190.

Courts have held advertising revenue not to constitute unrelated business income in some circumstances. For example, in National Collegiate Athletic Assn. V. Comm., (1990, CA10) 66 AFTR 2d 90-5602, 914 F.2d 1417, 90-2USTC 50513, revg (1989) 92 TC 456, advertising revenue received by the NCAA from the sale of programs of its annually sponsored championship tournament was not unrelated business income where the tournament lasted less than three weeks and occurred only once a year.

IRS Chief Counsel strongly disagrees with the Tenth circuit. The IRS argues the state court should have taken into account the time spent soliciting the advertisements and preparing the advertising for publication. IRS announced it will continue to litigate the issue in appropriate cases. Action on Decision 1991-015, 7/3/91.

IRS distinguished NCAA where a state university received income from advertising placed in its football souvenir programs. Here, a significant time span was involved over which the activities were conducted. The football season lasted three months and the work in setting up the programs and soliciting adverting took even longer. IRS letter ruling 9137002.

Assuming that the journal is published periodically throughout the year, an exempt organization should not rely on National Collegiate Athletic Assn. The periodic publishing and on going solicitation efforts will likely constitute a unrelated business regularly carried on. See 512.

The court also held advertising revenue does not constitute unrelated business income in US v. American College of Physicians, (1986 S.Ct). In American College of Physicians, the court found that the advertising business contributes importantly to the universitys education program through the training of students.

Also, advertising revenue does not constitute unrelated business income if the advertising contributes to the organizations purpose. For example, publication of legal notices in a bar association journal contributes to the associations exempt purposes by promoting the common interest of the legal profession through providing a single source of information regarding legal events in the county and therefore, wouldnt result in unrelated business income. Rev. Rul. 82-139, 1982-2 CB 108. However, advertising revenue received by a bar association for ads place in its attorney directory are taxable income since the advertising is commercial in nature and represents an effort on the part of advertisers to maximize sales to a certain segment of the public. IRS Letter Ruling 9148054.

Similarly, magazine advertising revenues received by an exempt trucking association did not contribute to the associations exempt purposes where the advertising represented marketing efforts by the advertisers to sell their product. In this case, no systematic effort was made by the organization to advertise products related to the editorial content and no effort was made by the organization to limit advertisements to new products. Florida Trucking Assn Inc. (1986) 87 TC 1039.

It is clear that, with a few exceptions, advertising revenues received by a 501(c)(3) exempt organization will often generate unrelated business taxable income (UBTI).

1gbpc2700sodimm
1gbmemory
Edgememoryreview
Abitmemory
Bossram
1gbpc2100sodimm
Lucentmemorycard
256mbsdmemory
Pc133rammemory
Newlinemovie
Ddr2sdram
256mbmemory
Intergraphmemory
Ddr2memory
512mbddr2
Etowermemory
Macportable
Codenamethemoviecleaner
Civicdutymovie
Vacancymovie
Vaiomemory
Laptopsmac
Pathfindermovie
Thepaintedveilmovie
Hotfuzzmovie
Sodimmmemory
Gp6350memory
Thelastkingofscotlandmovie
Compactflashmemorycardreader
Iraqinfringementsmovie
Computerrammemoryupgrade
Audiovoxmemorycard
256mbpc2700sodimm
Goodluckchuckmovie
Factorygirlmovie
Sigmamemory
Knockedupmovie
Pcrammemory
Slowburnmovie
Psionmemory
Usbflashmemorypendrives
Ddrpc2700
Diggersmovie
Poisonfriendsmovie
Ratatouillemovie
Thinkpadmemoryupgrade
Foxatomicmovie
1gbddr2
Memoryddrram
Theinvisiblemovie
Livefreeordiehard2movie
Nomadmovie
Xdcard
Adventmemory
Usbflashmemorydrives
Macrammemory
Jonestownmovie
Kingstonddrmemory
Imacram
Macintoshcomputermemory
Daywatchmovie
512mbpc2700ddr
Ddr2533sodimm
Supermicromemory
Extradad
2gbram
Fullofitmovie
Iomegamemory
Lonelyheartsmovie
Emachinesrammemory
Spectekmemory
Furmovie
Waitressmovie
Pc2100laptopmemory
Memoryrdram
Flagsofourfathersmovie
Romanticomovie
Memoryformac
G4memoryupgrades
Pc2100ddr
Thehawkisdyingmovie
Macg5computer
Macg4computer
Ddrpc3200512mb
1gbddrram
Macmemoryg5
Viewsonicmemory
Clevomemory
Laptopram1gb
64mbrammemory
Jvcmemory
Casiomemory
Ddr333ram
Sanyomemorycard
Macmemoryupgrade
Licensetowedmovie
Fracturemovie
Qdimemory
Pc2100memory
512mbpc2100sodimm
Macg5
128mbflashmemory
512mbpc2700ddrsodimm
1gbusbflashmemory
Ddr2ram
Edgememoryram
Musicandlyricsmovie
1gbpc2100ddrsodimm
256mbmemorycard
Ctxmemory
Graciemovie
Edgememorycards
Thenannydiariesmovie
Brothermemory
Macraid
Universalmovie
Documentarymovie
Cheapddrram
Lovelybeauties
Mpcmemorycard
Sdrammemory
Severancemovie
Rolandmemorycard
Thecondemnedmovie
Memoryandram
Happilyneveraftermovie
Memorycardreader
Aiptekmemorycard
G5memory
G3memoryupgrade
Picturehousemovie
Sandiskflashmemory
Sonypicturesclassicsmovie
Pc2100
Acpepmemory
Hostelpartiimovie
Desktopg4mac
Wildtigersihaveknownmovie
Okidatamemory
Pcchipsmemory
512flashmemory
Noreservationsmovie
Powermacg5
Weinsteincompanymovie
Averatecmemory
Memorymodules
Systemmemory
Misspottermovie
Edgememorywatch
Theex2movie
Deltafarcemovie
Ddr2memoryprice
Smokinaces
Inthelandofwomenmovie
Securedigitalmemorycardreader
Luckyyoumovie
Mgmmovie
512mbddrpc2700sdram
Microxdcard
Sodimm512mb
Philipsmemory
256mb133mhz
256mbmemory
Laptopram1gb
Thetrippermovie
Fullofitmovie
Computerramupgrade
Airmemory
Fredclausmovie
Pnypc2700memory
Winbookmemoryupgrade
G5memory
Archosmemory
Epicmoviemovie
Smokinaces
Pny512memory
Ddr2rammemory
Disneymemory
Tyanmemory
Eaglevssharkmovie
Gp7memory
Memoryformacbookpro
Foxsearchlightmovie
Wildhogsmovie
Albatronmemory
Argusmemory
Acermemory
Ctxmemory
Pc3200
Sodimm1gb
Usbflashmemorykey
Macg5
Sdrampcmemory
Samuelgoldwynroadsideattractionsmovie
4gbram
Addingmemory
Cheapddrram
1gbsdmemory
Macexternalstorage
Sodimmddr