The university's income tax obligations are a result of university activities and transactions identified as an unrelated trade or business income. Unrelated trade or business income is the gross income derived from any trade or business regularly carried on and not substantially related to the organization’s exempt purpose or function. The university pays income tax on its unrelated business taxable income and files with the IRS two annual Federal Form 990-T, Exempt Organization Income Tax Return.
On an annual basis, the Tax Office communicates instructions and distributes the Unrelated Business Income Survey to be completed by each department/unit Senior Fiscal Officer and returned to the Tax Office for analysis and Form 990-T reporting.
GL 10: Unrelated Business Income is a 30-minute course introducing the basic concepts of unrelated business income and when the university must pay taxes on said income. This course may be accessed via BuckeyeLearn.
The UBI Decision Tree is a tool departments may use to assist their analysis of current and new activity for potential unrelated business activities before reporting it to Tax Office. Click the button below to access the UBI job aides.
University Earnings Operations should clearly document how the activity meets the “related” test for UBIT purposes when the facts and circumstances support it (e.g., OSU-led research, educational benefit, or public scientific benefit).
Common UBIT Misconceptions
The biggest UBIT misconception: “The income is exempt because the proceeds support the university’s mission.”
UBIT generally depends on the activity that generates the income, not how the resulting funds are used.
Research
- Research is always exempt.” The exclusion depends on the nature of the activity, and research is not defined by a bright-line test — it is a facts-and-circumstances determination.
- “Testing is research.” Routine testing, inspection and quality control are not research — these are commercial services.
- “All corporate-sponsored studies are exempt.” Confidential results or exclusive rights for the sponsor increase UBIT risk.
- “If it happens in the lab, it is research.” Core facility and fee-for-service work — instrument time, sample processing, analytical services sold to outside parties — is a commercial service even when a research unit performs it.
- Research vs. Services Guidance (OSU log-in required)
- Industry Sponsored Checklist for ERIK Sponsored Program Officers (OSU log-in required)
- “If a payment is processed as a gift, it cannot be taxable income.” What matters is not how the payment is recorded but what the payer receives in return — benefits such as tickets, hospitality, exhibit space or promotional rights can make some or all of it an exchange, so document any benefits provided for Tax Compliance to evaluate.
- “Displaying a sponsor’s name or logo is always advertising.” Neutral acknowledgment of a sponsor’s name, logo, slogan, website or products generally is not advertising; promotional claims, endorsements, comparisons or pricing can convert it.
- “The sponsorship rules apply the same way for periodicals.” Recognition in regularly scheduled publications is reviewed differently from event or webpage recognition.
Contact tax@osu.edu for unrelated business income activity or tax questions.