Unrelated Business Income Questionnaire
The purpose of the questionnaire is to request your assistance in fulfilling the University’s annual tax reporting requirements for Income Tax form 990-T filing. Your assistance is vital to ensuring that Purdue completely and accurately complies with legally-mandated reporting provisions covering (a) unrelated business income, and (b) activities in other states.
A general description of the University’s reporting requirements follows.
UNRELATED BUSINESS INCOME (UBI)
The IRS requires tax-exempt organizations such as Purdue University to declare and pay tax on net income from any activity unrelated to the basic purposes for which the income tax-exemption was granted. Purdue’s tax-exempt purposes are primarily education and research.
The IRS considers an activity to be unrelated if it meets all of the following criteria:
- it is not substantially related to the organization’s tax-exempt purposes
- it is a trade or business (defined by the IRS as any activity carried on for the production of income from selling goods or performing services),
- it is regularly conducted (frequency and continuity are key in this assessment).
Purdue is not prohibited from engaging in activities which generate unrelated business income, but the IRS requires that we report net operating results, including net losses, from each unrelated activity. Net losses may be used to offset net income and, therefore, reduce the total tax liability of the University. For that reason, it is important for us to capture ALL UBI activities, regardless of actual profitability.
The attached questions are designed to help assess the revenue producing activities conducted in your department(s) during the fiscal year. Only consider revenue produced from sources outside Purdue; do not report revenue produced from sales of goods and services to other Purdue departments. If your area does not generate any revenues, or if the revenue is clearly related to the stated exempt purposes of the University, please make a note on the questionnaire. We would like to be aware of the activity and then opt to exclude it from reporting based on its related nature.
The Tax Department will review the completed questionnaires. Based on the responses received, you may be asked to provide further information about potentially unrelated activities. Please include any activities that you already report to the tax department and make a note if the nature of any of those activities has changed.
ACTIVITIES IN OTHER STATES
If Purdue University has a presence in, and derives revenues from within another state, there may be requirements to register to do business and possibly file an income tax or information return as a tax-exempt organization.