Unrelated Business Income and Form 990-T

Guide · Last reviewed October 20, 2026 · Legal and tax review: pending

Exempt does not mean every dollar is free of tax. Income from a business that is regularly carried on and not substantially related to the organization’s exempt purpose can be taxed, and may have to be reported on Form 990-T. This page explains the idea and the filing rules. Facts come from the IRS page on unrelated business income tax and the Form 990-T instructions (2025).

The three-part test

Income is unrelated business income when it comes from:

a trade or business,
that is regularly carried on, and
that is not substantially related to the organization’s exempt purpose.

The tax applies to the net income after the expenses of earning it. Special rules apply to certain organizations under sections 501(c)(7), (9), (17) and (20).

When Form 990-T is required

An exempt organization with $1,000 or more of gross income from an unrelated business must file Form 990-T. It is filed in addition to the Form 990, 990-EZ or 990-PF.
An organization must pay estimated tax if it expects its unrelated business tax for the year to be $500 or more.
Due date: the 15th day of the 5th month after the tax year ends for most organizations (the 15th day of the 4th month for trusts under section 401(a), IRAs and similar accounts). Form 8868 provides an automatic extension. If the date falls on a weekend or legal holiday, file by the next business day.
E-filing: the 2025 instructions say organizations and trusts defined in section 511 are required to file electronically.
Each organization files its own Form 990-T. Title-holding corporations and similar organizations may file a consolidated return in some cases.

Situations that raise the question

Activity	Why it may be unrelated business income
Sponsorships and advertising in a newsletter, program book or website	The line between a simple thank-you and advertising matters. Review the arrangement before you sign.
Renting space or equipment	Rent from real property is often excluded, but not always (for example if the property is debt-financed, or services are provided).
Selling merchandise unrelated to the mission	A gift shop that sells items with no link to the exempt purpose may be a regular unrelated business.
Events and food or drink sales	Frequency, who does the work and whether it supports the mission all matter.
Investment income	Dividends, interest and many capital gains are generally excluded, but income from debt-financed property or some partnership interests may not be.

Some exclusions exist, such as for businesses run mainly by volunteers or selling donated goods. Whether one applies depends on the facts, so read the instructions or ask us.

Keep the books readyTo report this income correctly, the books must separate the activity’s revenue and direct expenses, and show how shared costs are allocated. Many organizations only find out they have unrelated business income when a volunteer mentions a new revenue idea or an IRS letter arrives.

General educational information. Filing rules, thresholds, penalties and state requirements depend on individual facts and change over time. Confirm them on irs.gov and with your state regulators, and consult a qualified professional before filing a return or an application. This site is an independent guide and is not affiliated with the IRS.