UNRELATED BUSINESS INCOME TAX (UBIT)
Michigan State University (MSU) is both a public institution and a 501(c)(3) organization that is exempt from both federal and state income taxes. However, revenue generating activities not related to MSU’s tax-exempt purposes of education, research, and public service may be subject to federal unrelated business income tax (UBIT). If your department conducts revenue generating activities, please consult Manual of Business Procedures Section 51: Revenue Generating Activities and Unrelated Business Income Tax (UBIT) and the work aides linked below.
TAX LIABILITY
The department that engages in the activity generating the unrelated business income will bear the tax liability. The UBIT tax rate is based on the corporate tax rate, so net taxable income for unrelated activities is taxed at a flat tax rate of 21%. Quarterly internal billings are processed in October, December, March, and June to align with the IRS's estimated payment deadlines. Estimates are generally based on prior year taxable income and then adjusted to actual in the fourth quarter, so any refund would be issued to the department in June.
ANNUAL INFORMATION REQUESTS
MSU's tax year is the same as its fiscal year (July 1 - June 30), so annual requests are emailed to department contacts in August. Requests are customized for each department, but information generally includes:
- Revenue detail by customer/group
- Expenses detail by object code
- Reasonable method to allocate expenses to unrelated activities
- Identification of buildings/rooms used for unrelated activities
ANNUAL RETURN FILING
Form 990-T Exempt Organization Business Income Tax Return is filed with the IRS by the extended deadline of May 15.
As a 501(c)(3) organization, MSU is required to make its annual Form 990-T available for public inspection for a period of three years from the date the Form 990-T is required to be filed, including any extension. Requests for public inspection of MSU's Form 990-T should be directed to the Office of Tax Services (TaxReporting@ctlr.msu.edu or 517-355-0010).
