1. The income being generated is from a trade or business.

The term "trade or business" generally includes any activity carried on for the production of income from selling goods or performing services. An activity does not lose its identity as a trade or business merely because it is carried on within a larger group of similar activities that may or may not be related to the exempt purposes of the organization.

For example, the regular sale of pharmaceutical supplies to the general public by a hospital pharmacy does not lose its identity as a trade or business, even though the pharmacy also furnishes supplies to the hospital and patients of the hospital in accordance with its exempt purpose. Similarly, soliciting, selling, and publishing commercial advertising is a trade or business even though the advertising is published in an exempt organization's periodical that contains editorial matter related to the organization's exempt purpose.

Also, no part of a trade or business shall be excluded from being considered unrelated business income merely because it does not result in a profit.

2. The activity is conducted on a regular basis.

Business activities of an exempt organization ordinarily are considered regularly carried on if they show a frequency and continuity and are pursued in a manner similar to comparable commercial activities of nonexempt organizations.

For example, a hospital auxiliary's operation of a sandwich stand for two weeks at a state fair would not be the regular conduct of a trade or business. The stand would not compete with similar facilities that a nonexempt organization would ordinarily operate year-round. However, operating a commercial parking lot every Saturday, year-round, would be the regular conduct of a trade or business.

3. The activity is not substantially related to the exempt mission of the university.

UNLV's primary mission is to provide instruction and research. A business activity is not substantially related to an organization's exempt purpose if it does not contribute importantly to accomplishing that purpose. Whether an activity contributes importantly depends in each case on the facts involved.

It is how the income is generated that is important — do not confuse how the income is generated with how the income is used. Just because you use the income from the event does not change an "unrelated" activity to a related activity.

In determining whether activities contribute importantly to the accomplishment of an exempt purpose, the size and extent of the activities involved must be considered in relation to the nature and extent of the exempt function that they are intended to serve. For example, to the extent that an activity is conducted on a scale larger than is reasonably necessary to perform an exempt purpose, it does not contribute importantly to the accomplishment of the exempt purpose. The part of the activity that is more than is needed to accomplish the exempt purpose is an unrelated trade or business.

Exceptions

Income generated from the following activities is not subject to UBIT, even if all three unrelated business income tests described above have been met:

• Activities conducted for the convenience of the students, faculty, and staff
• Rental income
  • Applies to real estate only
  • Exclusion may be lost if services (i.e., catering) are provided
  • Exclusion may be lost (partially or fully) if personal property is included (i.e., audio visual equipment, tables, and chairs)
• Capital gain transactions
• Interest and dividends
• Royalty income
• Distribution of low-cost research
• Research activities
  • Activity must constitute research
  • If activity is for "routine testing" with no value, exception does not apply