NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Nonprofit Business Activity and the Unrelated Business Income Tax

James R. Hines, Jr.

NBER Working Paper No. 6820 (Also Reprint No. r2284)
Issued in November 2000
NBER Program(s):   PE

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

download in pdf format
   (157 K)

email paper

This paper is available as PDF (157 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w6820

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

Users who downloaded this paper also downloaded these:
Hines Non-Profit Business Activity and the Unrelated Business Income Tax
Barro and Lee w15902 A New Data Set of Educational Attainment in the World, 1950–2010
Kerr and Lincoln w15768 The Supply Side of Innovation: H-1B Visa Reforms and US Ethnic Invention
Baker and Milligan Disability Insurance Programs in Canada
Dee and Jacob w15672 Rational Ignorance in Education: A Field Experiment in Student Plagiarism
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us