Nonprofit Business Activity and the Unrelated Business Income Tax

No 6820, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: 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

JEL-codes: H25 L31 (search for similar items in EconPapers)
Date: 2000-11
Note: PE
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published as Non-Profit Business Activity and the Unrelated Business Income Tax , James R. Hines Jr.. in Tax Policy and the Economy, Volume 13 , Poterba. 1999

Downloads: (external link)
http://www.nber.org/papers/w6820.pdf (application/pdf)

Related works:
Chapter: Non-Profit Business Activity and the Unrelated Business Income Tax (1999)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:6820

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w6820

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().