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(A) Organizations described in sections
401(a) and 501(c).--The tax imposed by
paragraph (1) shall apply in the case of any
organization (other than a trust described in
subsection (b) or an organization described
in section 501(c)(1)) which is exempt, except
as provided in this part or part II (relating
to private foundations), from taxation under
this subtitle by reason of section 501(a).
Section 512 defines UBTI as follows:
SEC. 512. UNRELATED BUSINESS TAXABLE INCOME.
(a) Definition.--For purposes of this title--
(1) General rule.--Except as otherwise provided in
this subsection, the term “unrelated business taxable
income” means the gross income derived by any
organization from any unrelated trade or business (as
defined in section 513) regularly carried on by it,
less the deductions allowed by this chapter which are
directly connected with the carrying on of such trade
or business, * * *.
Section 513 defines the term “unrelated trade or business”.
In relevant part, that section provides:
SEC. 513. UNRELATED TRADE OR BUSINESS.
(a) General Rule.–-The term “unrelated trade or
business” means, in the case of any organization
subject to the tax imposed by section 511, any trade or
business the conduct of which is not substantially
related (aside from the need of such organization for
income or funds or the use it makes of the profits
derived) to the exercise or performance by such
organization of its charitable, educational, or other
purpose or function constituting the basis for its
exemption under section 501 * * *.
In summary, sections 511 through 513 require an otherwise
tax-exempt organization to pay tax on its UBTI. Sec. 511(a)(1).
UBTI is an organization's gross income, less allowable
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Last modified: May 25, 2011