Video: Introduction to Unrelated Business Income

In this lesson, explore the intricacies of unrelated business income (UBI) and its relevance to tax-exempt organizations such as non-profits and educational institutions. Delving into the nuances that distinguish UBI from the general income of these entities, Nick Palazzolo, CPA, clarifies that while such entities are typically exempt from federal income tax, they may still incur tax liabilities through activities that don't align with their primary mission. The discussion includes simple yet effective examples to illustrate the concept, ensuring a pragmatic understanding of UBI tax implications, the reasoning behind this tax, and the importance of maintaining a level playing field with for-profit businesses. Furthermore, Nick emphasizes the policy rationales for taxing UBI to prevent misuse of tax-exempt status and to encourage organizations to remain focused on their declared exempt purposes.