Tax-Motivated Expense Shifting by Tax-Exempt Associations

2007 ◽  
Vol 29 (1) ◽  
pp. 43-60 ◽  
Author(s):  
Mary Ann Hofmann
Keyword(s):  
Regression Model ◽  
Nonprofit Organizations ◽  
Income Tax ◽  
Estimation Model ◽  
Agricultural Associations ◽  
Tax Exempt ◽  
Business Income ◽  
Unrelated Business

Tax-exempt organizations are subject to the Unrelated Business Income Tax (UBIT) on the profits of business activities unrelated to their exempt mission. This study extends recent research on the expense allocations of charitable nonprofit organizations by examining a group of noncharitable nonprofits—primarily trade, labor, and agricultural associations—that differ from charitable nonprofits on a number of dimensions. The paper tests for tax-motivated expense shifting by associations. Data is obtained from the IRS Statistics of Income Division, and is supplemented by data requested from associations. Reported unrelated business expenses are compared to those predicted by a regression model to estimate expense shifting. Associations are estimated to shift approximately 20–21 percent of the expenses reported on their UBIT returns. Further analysis calls into question the validity of the estimation model, and suggests that expense shifting may be understated in this and previous studies.

In Search of Profits: Measuring Income from the Unrelated Commercial Use of a Tax-Exempt Organization's Assets

2001 ◽  
Vol 76 (2) ◽  
pp. 245-262 ◽  
Author(s):  
Richard C. Sansing
Keyword(s):  
Opportunity Cost ◽  
Income Tax ◽  
Business Activity ◽  
Financial Return ◽  
Taxable Income ◽  
Commercial Use ◽  
Tax Exempt ◽  
Business Income ◽  
Unrelated Business ◽  
The Way

Profits a tax-exempt organization earns from business activities that are not related to the organization's exempt purpose are subject to the unrelated business income tax (UBIT). This paper shows that when the taxable and tax-exempt activities are substitutes, taxable income exceeds the incremental pretax financial return from the unrelated business activity because the exempt organization cannot deduct the opportunity cost of lost exempt function revenues when computing UBIT. As a result, the exempt organization may: (1) reduce or eliminate its unrelated business activity, or (2) change the way it uses its assets for unrelated business purposes by licensing the use of its assets to an unrelated taxable organization in exchange for nontaxable royalties. The model shows that although UBIT may distort the way in which an exempt organization uses its assets, this distortion can increase social welfare.

The Internal Revenue Code and Religious Institutions

2017 ◽  
Author(s):  
Edward A. Zelinsky
Keyword(s):  
Social Security ◽  
Income Tax ◽  
Income Taxes ◽  
Religious Institutions ◽  
Retirement Plans ◽  
Payroll Taxes ◽  
Internal Revenue ◽  
Tax Exempt ◽  
Unrelated Business

This chapter examines the Internal Revenue Code’s treatment of religious entities. The federal tax statute embodies three diverse approaches to taxing and exempting sectarian organizations and activities. Some provisions of the Code—the charitable deduction, the general income tax exemption for eleemosynary institutions, the federal unemployment tax—exempt religious entities and other charitable, educational, and philanthropic institutions. Other provisions of the Code narrowly target churches for tax exemption. For example, the Code relieves churches of filing requirements with which nonchurch religious entities and other eleemosynary organizations must comply. Similarly, churches’ retirement plans receive lenient treatment under the Code. Churches receive procedural protections from IRS audits.Yet other provisions of the Code tax churches as for secular entities. Churches generally pay FICA taxes—Social Security and Medicare payroll taxes—on the compensation paid to nonclerical employees. These payroll taxes can be considerable. Churches also pay federal income taxes on their unrelated business incomes.

Collegiate Athletics and the Unrelated Business Income Tax

1994 ◽  
Vol 8 (1) ◽  
pp. 36-48 ◽  
Author(s):  
Caroline Kern Craig ◽  
Karen Weisman
Keyword(s):  
Income Tax ◽  
Sport Management ◽  
Collegiate Athletics ◽  
Athletic Programs ◽  
Athletic Administrators ◽  
Court Cases ◽  
High Profile ◽  
Revenue Sources ◽  
Business Income ◽  
Unrelated Business

In recent years, many university athletic programs have turned to program and scoreboard advertisements, corporate sponsorships, and other nontraditional sources of revenue to supplement their operating budgets. As confirmed by several high-profile court cases, these nontraditional revenue sources can be subject to federal unrelated business income tax—-a consequence often overlooked by athletic administrators and those involved in sport management programs. This article discusses the unrelated business income tax and its impact on collegiate athletic programs. Court cases and Internal Revenue Service pronouncements are reviewed, where applicable. Compliance and planning issues are also briefly addressed.

The Unrelated Business Income Tax Recreational Sports

1996 ◽  
Vol 21 (1) ◽  
pp. 18-21
Author(s):  
Paul R. Milton ◽  
David M. Young
Keyword(s):  
Income Tax ◽  
Recreational Sports ◽  
Business Income ◽  
Unrelated Business
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