Tax Compliance
West Vandenberg Hall, Room 121E
502 Meadow Brook Road
Rochester, MI 48309-4452
(248) 370-2296
Fax: (248) 370-2554

Unrelated Business Income Tax

Oakland University is exempt from federal income tax as integral part of the State of Michigan.  However, revenue generating activities not directly related to Oakland University's exempt purposes of teaching, research, public service, and outreach may be subject to federal Unrelated Business Income Tax (UBIT).  Congress imposed UBIT on exempt organizations to eliminate a source of unfair competition by placing tax exempt organizations on the same tax basis as nonexempt organizations with which they compete.  When a revenue generating activity is a trade or business, regularly carried on, that is not related to the University's mission, it may result in UBIT.

Internal Revenue Service Regulations go into great detail in defining these concepts.  For UBIT purposes, trade or business generally means any activity that is carried on for the production of income from the sale of goods or the performance of services.  We consider whether the University intends to make a profit from an activity when determining whether it is a trade or business.  The frequency and continuity of the activity and the manner in which it is pursued are considered in determining whether it is regularly carried on.  Often the most difficult determination is whether the activity is related to the University's exempt mission.  Numerous private letter rulings have been issued by the IRS providing guidance on when an activity is unrelated to a particular exempt purpose.  There are also numerous statutory exceptions for particular activities and exclusions for certain income.  Excluded items primarily involve passive income sources and include royalties, dividends, interest, annuities, certain rents from real property, and capital gains. 

New activities are reviewed by the Tax Compliance section of the Controller's Office to determine whether revenues are reportable on the University's annual Unrelated Business Income Tax Return (Form 990-T).  UBIT determinations are very dependent on the facts and circumstances of each activity.  Questions regarding the tax status of a particular revenue producing activity may be addressed to the Tax Compliance section of the Controller's Office (X2357).

The following are examples of activities that are not related to the mission of the University and may be subject to unrelated business income tax:
  1. Alumni and public use of the University recreation center
  2. Alumni and public use of the University golf courses
  3. Alumni and public use of the Oakland Center
  4. Public use of Meadowbrook Hall
  5. Sale of printing services to non-university users
  6. Rental of sports facilities such as the O'Rena and soccer fields if substantial services are provided to the user
  7. Sponsorships whereby the sponsor receives a substantial return benefit that has a fair market value that exceeds 2% of the sponsorship payment
  8. A hyperlink from a University website to a sponsor's website where an endorsement appears by the University for the sponsor's product
  9. On-line stores or auctions hyperlinked to a University website
  10. Sale of mailing lists or other data to commercial entities
  11. Income received from companies advertising in athletic programs
  12. Income received from companies advertising on University websites
  13. Travel tour programs  (i.e. sightseeing, recreational, social, cruise, etc.) operated by the alumni association that are not authentic educational activities