Unrelated Business Income
The University System of Maryland is generally considered to be tax-exempt under IRS Code Section 115. However, each University must file and pay taxes on any income that is earned by an activity regularly operating as a trade or business that is not related to accomplishing the mission of the University. This tax is referred to as Unrelated Business Income Tax (UBIT).
The Salisbury University Campus shall comply with IRS and USM requirements to report all unrelated business income less appropriate deductions. The Budget Office and the departments shall interact as follows:
- The Budget Office will supply the necessary forms and compile the information for the transfer to the University System of Maryland Office.
- Departments will initially complete the UBI Survey Questionnaire and the UBI Summary Acknowledgement to report the revenue generating activities within the department. Please read the Survey Instructions for assistance in completing these forms. If an activity is deemed to be UBI, then the department, Budget Office and Comptroller’s Office together will review and report the expenditures and facility utilization for each of those activities. The following documents are provided to assist you in this process:
- The Budget Office will provide guidance in the completion of the forms and aid in interpretation of the applicable IRS Code sections.
- In the event that there is a disagreement concerning the appropriate tax treatment of an activity, the department and the Budget Office will separately prepare a written statement of the facts and circumstances. These documents shall also contain an explanation supporting each position. These documents will be reviewed by the University Legal Office and USM.
- If the tax status of the activity cannot be determined by the Budget Office and the University Legal Office to the department’s satisfaction, the department may desire to obtain a Private Letter Ruling from the IRS. The department shall pay for all costs of obtaining such a ruling, which may be substantial.
- It is the department’s responsibility to pay all back taxes, penalties, and interest assessed by the IRS.