Unrelated business activity is an activity that is (i) a trade or business; (ii) regularly carried on; and (iii) not substantially related to further the purpose for which exempt status was granted.  A trade or business means the activity is carried on for the purpose of generating income from selling a product or performing a service.  Regularly carried on means the activity is frequent and continuous , similar to a commercial activity of a for-profit entity.  Substantially related means the activity does not material or important to the organization’s exempt purpose.  If an activity meets these three criteria, income of $1,000 or more must be reported on Form 990-T.

The following is an example of related and unrelated business activities.

501(c)(3) related activities

501(c)(3) unrelated activities

501(c)(4) related activities

501(c)(4) unrelated activities

501(c)(5) related activities

501(c)(5) unrelated activities

501(c)(6) related activities

501(c)(6) unrelated activities