Unrelated Business Income
If your church receives income from any source other than charitable contributions we strongly recommend that you investigate whether or not you may have an unrelated business income tax (U.B.I.T.) liability.
To help in this decision making process, please take advantage of the link below which will allow you to download a Microsoft Excel spreadsheet that has a U.B.I.T. decision matrix.
Excel Download:
UBIT-DecisionTree.xls
Important note: choose “enable macros” as you open the spreadsheet.
Unrelated Business Income Tax
One common misconception about churches is that any income they generate is non-taxable. In fact, it is quite common for churches to generate income that is fully taxable. The I.R.S. is concerned with how your income is generated, regardless of whether or not it is ultimately used for your tax-exempt ministry. Therefore, it is important to look at the source of your income rather than the ultimate use of it to determine if it is tax-exempt.
One of the more common sources of potentially taxable income for churches is rental income. Since we encounter this fairly often when helping churches with funding for capital projects, we decided to create a tool to help consider whether or not a church may be incurring a possible tax liability as a result of its activities (regardless of its source).
The above decision matrix is designed to provide accurate information for C&MA churches and districts in regard to the possibility of unrelated business income. This tool is provided to assist a church or district in making a preliminary finding and is not intended to encompass all applicable laws and regulations. Because the response to each question must accurately reflect the circumstances of a specific scenario, there is no guarantee that the results obtained will always be completely accurate. It should be understood that the provider of this decision matrix is not engaged in rendering legal, accounting, tax, or other professional services. Once a conclusion is drawn from the decision matrix, it is strongly recommended that the services of a competent professional be sought.
