Form 990 - Unrelated Business Income and Form 990-T  

Tax-exempt organizations have federal tax and legal rules largely different from those that apply to for-profit organizations. These rules can be complex and somewhat esoteric. From a federal tax perspective, charities are divided into two major classes: public charities and private foundations. Each class has its own special tax rules, governance provisions, and tax reporting obligations. Generally, when reference is made to tax-exempt organizations in these materials, it will be to public charities rather than private foundations, unless specific mention is made of private foundations.

The tax reporting rules relating to tax-exempt organizations are complicated by unique governance rules relating to how charities are organized, conduct their activities, and interact with major donors and others with substantial influence over the organization. Because governance issues are so important, Congress has mandated that charities are the only tax reporting organizations that must publicly disclose their Form 990.

Most information tax-exempt organizations provide on Form 990 pertains to organizational governance and organizational compliance with various statutory requirements relating to how the organization and its founders, contributors, and board members deal with one another. As such, Form 990 is unlike other tax returns in that it does not focus on the calculation of the entity's taxable income. Form 990 does not even contain space for calculating the organization's tax liability when it has one. (This is calculated on a separate form-Form 990-T.) Although tax-exempt organizations can have an income tax liability, relatively few tax-exempt organizations actually incur an income tax liability.

In this basic level course we will discuss unrelated business income and Form 990-T. This course is most beneficial to professionals new to tax reporting for tax-exempt organizations who may be at the staff or entry level in organization but also for a seasoned professional with limited exposure to this topic.