To: University Business Managers
From: David Blakemore, Director of Financial Reporting & Management Services
Date: October 20, 2014
The Financial Reporting department of the University Controller’s Office is responsible for compiling unrelated business income (UBI) revenue and expenses each fiscal year for inclusion on the University’s Form 990‐T filed annually with the Internal Revenue Service.
Unrelated business income may be generated if goods or services are sold to external customers that are not part of the university campus, i.e., students, faculty, staff and other University departments. When an activity is conducted with external non-University customers, the department conducting the activity is required to complete the UBI Tax Compliance Questionnaire. This questionnaire is the primary tool used by the Financial Reporting Department in determining the taxable status of the activity – whether the net income generated should be reported as unrelated business income.
Revenues generated from sales to external non-University customers may generate unrelated taxable income when the activity constitutes a regularly carried on trade or business that is not substantially related to the University’s educational mission. To determine “relatedness,” the Internal Revenue Code focuses on the nature of the activity. A university unit or department is not prohibited from engaging in activities which are determined to generate unrelated business income, but is required to report net operating results, fiscal year revenue and expenses, for an unrelated business activity to the Financial Reporting Department. The University policy regarding UBI can be found in the Finance Division Policies and Procedures Manual, Policy 712.
Please complete a separate questionnaire for each income‐producing activity conducted by the department where external non-University customers are involved and return the completed questionnaire to Thomas Schneeberger, Assistant Director of Financial Reporting, either to campus mailbox 1270 or by email at schneebt@email.unc.edu. If you have any questions, please call Thomas at 919-962-1362 or contact him by the previously noted email address.
Note: This memo is also being sent to Deans, Directors and Department Chairs.