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  5. Unrelated Business Income Tax
  6. Unrelated Business Income (UBI) Definitions

Unrelated Business Income (UBI) Definitions

Advertising – Advertising includes an inducement to action, providing qualitative or comparative language, pricing information, an indication of savings, or an endorsement to a sponsor.  Advertising may occur on scoreboards, newsletters/publications, posters, mailings, websites, TV, or radio broadcasts, for example.  The sponsor receives a direct benefit from advertising.

Affinity income – Affinity income is income from a business partnership in which a one party offers special rates or services to another in an effort to increase revenue for both parties. (e.g. a bank’s credit card program offered to students at the university, whereby the university receives income)

Career services (to students) – assisting students with achieving their career goals through effective job searches, resume preparation, interviewing, job and professional development skills, educational opportunities, career connection opportunities, etc.

Comparable services – similar revenue-generating activities or services provided by a commercial/for-profit entity

Convenience (of members) – Includes activities or services conducted for the convenience of university faculty, staff, students, patients, or other employees.  Sales to the general public do not fall within the convenience of members exception.  The sale of non-educational items that are low in cost and in recurrent demand may fall under the convenience exception (for example, newspapers, candy, snacks, cigarettes, film, magazines, etc.)  The convenience exception does not apply to the sale of items with a useful life of more than one year, except for logo novelty items or logo clothing.

Donated items – sales of merchandise where substantially all (85% or more) are donated to the university (for example, a university-operated thrift store may receive such donated items)

External customers – Customers who are not current UF faculty, students, staff, or patients are considered external.  Members of the general public, UF alumni, and outside entities are all considered external customers.

License agreement – A license agreement is a legal contract between two parties, known as the licensor and the licensee. In a typical licensing agreement, the licensor grants the licensee the right to produce and sell goods, apply a brand name or trademark, or use patented technology owned by the licensor. In exchange, the licensee usually submits to a series of conditions regarding the use of the licensor’s property and agrees to make payments known as royalties.

Passive income –  income produced from passive activities, which include 1) rentals, including both equipment and rental real estate, regardless of the level of participation, and 2) businesses in which the taxpayer does not materially participate on a regular, continuous, and substantial basis.

Passive Activities

Income and losses from the following activities would generally be passive:

  • Equipment leasing
  • Rental real estate (with some exceptions)
  • Sole proprietorship or farm in which the taxpayer does not materially participate
  • Limited partnerships with some exceptions
  • Partnerships, S-Corporations, and limited liability companies in which the taxpayer does not materially participate

Profit motive – Conducting an activity for the purpose of generating a net profit after all applicable direct and indirect expenses (like depreciation) have been deducted indicates a profit motive.  Operating a revenue-generating activity only on a “break-even” basis over time demonstrates lack of a profit motive.  Likewise, conducting an activity merely to offset some of the costs of that activity demonstrates lack of a profit motive.

Real property – land and improvements to land and any property attached directly to it.  Real property can include buildings, ponds, canals, integrated equipment (e.g. light fixtures and well pump) and roads.

Regularly carried on – Activities showing a frequency and continuity pursued in a manner similar to comparable commercial activities of for-profit organizations are considered regularly carried on.  If an activity is a type that a for-profit entity would conduct on a year-round basis, the same activity conducted by an exempt entity is not considered “regularly carried on” if conducted only for a few weeks.

Royalties / License fee income – tax, duty or compensation paid to owners of a patent, copyright, mineral interest, or other property right for the use of it or the right to exploit it (includes royalties received from licenses by the university as the legal and beneficial owner of patents assigned to it.)  Note, royalties derived in part from the performance of services will not constitute royalty income.

Sponsorship – Sponsorships my occur on scoreboards, newsletters/publications, posters, mailings, websites, TV, or radio broadcasts.  A strict sponsorship should NOT include characteristics of advertising.  Rather, a simple “thank you”, mention, or acknowledgement of a sponsor’s name and/or a sponsor’s logo, along with the sponsor’s contact information is appropriate.  The sponsor receives no direct benefit from providing a sponsorship.

Tangible personal property (TPP) – physical property (other than real property) that can be seen, weighed, measured, or touched or is any way perceptible to the senses, such as furniture, clothing, household goods, electronics, jewelry, art, athletic equipment, tools, collectibles and vehicles. In Florida, tangible personal property also includes electric power or energy.  It is distinct from real property in that you can move it from one location to another.

Unrelated business income – income from a trade or business, regularly carried on, that is not substantially related to the charitable, educational or other purpose that is the basis of the organization’s (UF’s) exemption from federal income taxation.

Volunteer workforce – activities in which substantially all (85% or more) work is performed by unpaid volunteers

Last Reviewed

Last reviewed on 03/20/2024


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