UVM is exempt from federal income taxation as a 501(c)(3) tax-exempt organization; however, the university is required to pay federal income tax on net income from activities that are unrelated to the three key components of the tax-exempt mission of the university: teaching, research, and public service. Unrelated Business Income Tax (UBIT) is the federal income tax imposed on the Unrelated Business Income generated by tax-exempt organizations.
Unrelated Business Income consists of income the University generates from activities that are not related to its tax-exempt activities. Income is considered to be “unrelated” if all of the conditions listed below are met:
- The activity is conducted as a trade or business;
- The activity is regularly carried out, and;
- The activity is not substantially related to the exempt mission of the university.