Internal Revenue Code section 513(a) defines "unrelated trade or business" as any trade or business the conduct of which is not substantially related to the exercise or performance of an organization's exempt purpose or function. Therefore Minnesota State Colleges and Universities, even though a tax exempt entity, is subject to income tax requirements.
Some common activities conducted by colleges and universities which raise potential unrelated business income concerns are as follows:
- facility rental income
- advertising income
- bookstore operations
- use of recreational facilities by the general public
- operation of parking lots, and
- dormitory rentals
Unrelated business income needs to be reviewed on a case-by-case basis and should be considered before engaging in the activity or entering into the contract.
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