Unrelated Business Income

Rochester Institute of Technology (RIT) is recognized as a tax-exempt organization under IRS Section 501(c)(3). This means RIT does not have to pay federal income tax on income earned from its educational and research activities.

However, if RIT engages in activities unrelated to its exempt purposes, the income from those activities may constitute Unrelated Business Income (UBI). This income is subject to Unrelated Business Income Tax (UBIT), generally imposed at a rate consistent with the jurisdiction's corporate income tax rate.

RIT is required to identify and report any unrelated business income on its annual tax return, and to pay any applicable taxes according to federal, state, local and international laws.

Income may be classified as UBI and subject to tax if it meets all of the following criteria:

1. Substantially Unrelated: The activity generating the income does not support RIT's primary exempt purposes. The activity does not significantly enhance RIT's educational and research goals.
2. Trade or Business: The income-generating activity qualifies as a trade or business, which includes any efforts aimed at generating profit through the sale of goods or provision of services.
3. Regularly Carried On: The activity must be carried out with regularity and continuity, similar to a commercial enterprise. This includes activities conducted year-round or on a consistent seasonal basis.

The Tax Department conducts an annual review of revenue recorded in the general ledger. If we identify activities that may qualify as Unrelated Business Income (UBI), we will contact the relevant department to gather additional information. Based on this assessment, we will determine the appropriate next steps.

If you believe an activity that you are engaging in may be UBI based on application of the above criteria, please contact taxdept@rit.edu to discuss further.