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Unrelated business income tax returns, 2004.

The aggregate "unrelated business" income tax (UBIT) liability of nonprofit charitable and other types of tax-exempt organizations rose 66 percent between Tax Years 2003 and 2004. These organizations may engage in activities considered unrelated to their tax-exempt missions, but income produced from these activities is subject to Federal taxation. (1) Of the 38,040 organizations that were required to file Forms 990-T, Exempt Organization Business Income Tax Returns, for Tax Year 2004 (Filing Years 2005 and 2006), 48 percent reported positive unrelated business taxable income (UBTI). The number of organizations filing Forms 990-T increased about 5 percent, with the number reporting positive UBTI increasing 16 percent.

Tax-exempt organizations produced a total of $9.5 billion of gross unrelated business income (UBI) for 2004, nearly 13 percent more than the 2003 amount. After offsetting total gross UBI with $9.0 billion of total deductions, the resulting UBTI (less deficit) for 2004 was $0.5 billion. Positive UBTI amounted to $1.3 billion for 2004, a 65-percent increase over 2003, and the associated UBIT was $364.6 million. After adjusting UBIT with certain credits and other taxes, the total tax reported on Form 990-T was $367.7 million. Figure A contains these and other statistics for selected major financial data items reported on Forms 990-T for Tax Years 2003 and 2004.

Total tax takes into account $364.6 million of unrelated business income tax, plus $3.9 million of alternative minimum tax, $4.3 million of "proxy tax" on certain nondeductible lobbying and political expenditures, and $0.1 million of "other" taxes, minus $5.2 million of tax credits. (2) Tax credits included the foreign tax credit ($3.5 million), general business credit ($1.0 million), credit for prior-year minimum tax ($0.4 million), and "other" credits ($0.3 million).

Background

Definition of Unrelated Business Income

Nonprofit organizations that are granted Federal tax exemption based on their mission-related purposes are allowed to generate income from unrelated business activities; however, the income from these activities is subject to taxation. Unrelated business income is produced from an activity that is both conducted on a regular basis and not directly related to an organization's tax-exempt mission. The fact that the income may be used for furthering an organization's exempt purposes does not alter the definition. (3) Any profits from an organization's unrelated business activities are taxed at regular corporate or trust income tax rates. (4) Certain activities are excluded from taxation; some examples are engaging in business activities in which substantially all of the work is performed by volunteer labor; selling merchandise that the organization received as a gift or contribution; and operating certain games of chance, as specified in the Internal Revenue Code (IRC).

Form 990-T Filing Requirements

Organizations that are described in IRC sections 220(e), 401(a), 408(e), 408A, 501(c)(2)-(27), 529(a), and 530(a) must file a Form 990-T if they received $1,000 or more of gross income from business activities that were considered unrelated to the purposes for which they received tax-exempt status. IRC section 501(d) religious and apostolic organizations, farmers' cooperatives, and section 4941(a)(1) "nonexempt charitable trusts" report taxes on forms other than Form 990-T. The various types of tax-exempt organizations subject to the unrelated business income tax provisions are described by 1RC section in the Appendix to this article.

Most tax-exempt organizations are required to file an annual Form 990, Return of Organization Exempt From Income Tax, or Form 990-EZ, Short Form Return of Organization Exempt From Income Tax (used by organizations with annual gross receipts of less than $100,000 and total end-of-year assets of less than $250,000). (5) IRC section 501 (c)(3) private foundations and certain charitable trusts file an information return on Form 990-PF, Return of Private Foundation or Section 4947(a) (1) Nonexempt Charitable Trust Treated as a Private Foundation. Form 990-T is required only for a tax year in which an organization has unrelated business income.

To report unrelated business income of $1,000 (the filing threshold) or more for Tax Year 2004, IRC section 220(e), 401(a), 408(e), 408A, and 530(a) trusts' required reporting period was Calendar Year 2004, and the Form 990-T filing date was April 15, 2005. For all other organizations, the required reporting period was any accounting period beginning in Calendar Year 2004 (and, therefore, ending between December 2004 and November 2005, for full-year return filers). The associated required due dates for filing Tax Year 2004 Forms 990-T generally spanned May 2005 to April 2006, but extensions of time to file beyond this period were routinely granted to many organizations. Corresponding to the required filing dates, the Tax Year 2004 study sample was drawn from Forms 990-T processed by IRS throughout Calendar Years 2005 and 2006. (See the Data Sources and Limitations section of this article for detailed information on the study sample.) Because of the various accounting periods of the organizations filing a Tax Year 2004 return, the financial activities covered in this article span the period January 2004 through November 2005, although 58 percent of Form 990-T fliers had Calendar Year 2004 accounting periods.

Any returns filed by organizations with gross unrelated business income (UBI) below the $1,000 filing requirement threshold were excluded from the statistics presented in this article. Some of these returns were filed inadvertently; others were filed for a specific reason, such as to report and pay proxy tax (only) or to claim a refund of tax withheld erroneously on interest or dividend payments (reported on Form 1099) because the payer did not realize that the payee was a tax-exempt organization. Organizations with gross UBI between $1,000 and $10,000 were required to report only totals for expenses and deductions (except for the "specific deduction" and "net operating loss deduction," which all organizations reported separately). Organizations with gross UBI over $10,000 were required to report more detailed expense and deduction information.

Reported Tax Liability

The amount of total tax liability originally reported on Forms 990-T, as stated in these statistics, may not necessarily be the amount ultimately paid to the Internal Revenue Service ORS). Changes in tax liability assessments can be made after the original return is filed, either by the taxpayer on an amended return, by the IRS after examination, or by litigation.

Key Factors Affecting Unrelated Business Taxable Income and Tax

Unrelated business taxable income and tax declined each tax year from 1998 to 2002, a period when financial markets experienced high volatility. (6) Over the 4-year period, UBTI and UBIT each decreased more than 60 percent. In the period between Tax Years 2002 and 2004, when stocks and other financial vehicles performed favorably, UBTI rose 99 percent, and UBIT rose 88 percent. Key factors affecting the amount of UBTI and UBIT reported each year on Form 990-T include the effect of market fluctuations on organizations with large amounts of unrelated business investment income; the organizational structure of an entity, as either a corporation or trust; each type of organization's applicable tax rates; and the interrelationship between total amounts of gross UBI and allowable deductions. When analyzing changes in overall UBTI and UBIT reported for a given tax year, it is difficult to isolate the contribution of any one factor; rather, a blend of factors work together to affect change.

In general, there is a clear distinction between organizations structured as corporations and trusts, with regard to the proportion of UBI attributable to four primary sources of investment income: net capital gains, combined income from partnerships and S corporations, unrelated debt-financed income, and investment income reported by sections 501(c)(7) recreational and social clubs, 501(c)(9) voluntary employees' beneficiary associations (VEBAs), and 501(c)(17) supplemental unemployment benefit trusts. (7, 8) Based on data from Forms 990-T filed for Tax Years 1998 to 2004, presented in Figure B, the annual ratios of the total of these four investment items to total gross UBI ranged from 9 percent to 16 percent for tax-exempt corporations, compared to a range of 83 percent to 97 percent for tax-exempt trusts. Tax-exempt trusts historically have been subject to higher marginal tax rates than corporate exempt entities, resulting in higher average UBIT liability amounts for the trusts. Annual average UBIT liability amounts of trusts ranged from two times to six times larger than respective annual average UBIT liability amounts of corporations for tax years spanning 1998 to 2004. In addition, because these trusts hold high concentrations of investment assets that generate UBI, the annual aggregate UBTI and UBIT amounts that they report each year have been closely tied to fluctuations in equity and other financial markets.

Ratios of UBTI to Gross UBI for Selected Types of Organizations

For 2004, 85 percent of all Form 990-T filers had a corporate structure; the remainder were formed as trusts. Certain groups of fliers, classified by Internal Revenue Code section, are dominated by organizations with one type of the two structures. Three groups that are comprised mostly of trusts are IRC section 401(a) qualified pension, profit-sharing, and stock bonus plans; section 408(e) traditional Individual Retirement Accounts (IRAs); and section 501(c)(9) VEBAs, all of which typically report income from investment activities as a primary source of UBI. Organizations that rely mainly on investments for income usually have higher UBTI-to-gross-UBI (UBTI-to-GUBI) ratios than organizations with more diverse income sources. By the nature of their operations, heavily invested organizations are relatively limited in the types and amount of deductions they can claim to offset income. They have lower operating costs because their investment portfolios are usually overseen by only one or two trust managers, and they do not incur the variety of expenses associated with organizations largely engaged in commercial enterprises. As shown in Figure C, sections 401(a), 408(e), and 501(c)(9) organizations had UBTI-to-GUBI ratios of 54 percent, 75 percent, and 38 percent, respectively, for 2004.

Exempt organizations that produce gross UBI from a broad mix of sources, therefore having the opportunity to offset income with a larger range of operational expenses and deductions, include sections 501(c)(3) nonprofit charitable organizations; 501 (c)(5) labor, agricultural, and horticultural organizations; 501(c)(4) civic leagues, social welfare organizations, and local associations of employees; 501 (c)(6) business leagues, chambers of commerce, and real estate boards; 501(c)(7) recreational and social clubs; and 501 (c)(19) veterans' organizations. (9) The vast majority of these organizations are structured as corporations, and they are more likely to supplement their mission-related revenues with UBI produced from commercial and, to a lesser extent, investment activities. Within this grouping of organizations, UBTI-to-GUB! ratios ranged from 3 percent to 13 percent.

Relationship Among Gross UBI, Total Deductions, and Taxable Income

Another distinction between tax-exempt corporations and trusts is how the interrelationship between gross UBI and total deductions affects the amount of income that is ultimately taxable. Exempt corporate entities have a higher degree of flexibility in the allocation of administrative and operational expenses to their unrelated business activities, compared to exempt trusts. Historically, corporate Form 990-T fliers have accounted for large shares of both total gross UBI and total deductions. For each year in the 1998 to 2004 period presented in Figure 13, total deductions reported by corporate Form 990-T fliers were between 95 percent and 105 percent of their gross U131. In comparison, tax-exempt trust fliers' total deductions ranged from 42 percent to 76 percent of their gross UBI during the same period.

The synergy of annual rates of change in aggregate income and deductions also contributes, along with other factors, to overall increases or decreases in total UBTI reported each year. While the U13TI of organizations, as a whole, may rise or decline for a given year, the reverse can occur for particular subgroups of Form 990-T fliers. Tax Year 2000 is a good example to illustrate this. Aggregate U13TI reported by all organizations declined by 4 percent between Tax Years 1999 and 2000. However, exempt corporations' UBTI for 2000 rose by 13 percent, and exempt trusts' UBT1 declined by 16 percent. The two groups of 31,245 corporate entities and 7,322 trust entities each accounted for half of all U BTI reported for 2000. Aggregate gross UBI and total deductions of all Form 990-T filers increased by 9 percent and 13 percent, respectively, from 1999 to 2000. Corporate filers' experienced a 15-percent growth in total gross UBI and a 16-percent increase in total deductions. In contrast, trust filers experienced declines in both total gross UBI and total deductions, of 18 percent and 21 percent, respectively. For 2000, the ratio of total deductions to gross UBI was virtually 100 percent for tax-exempt corporations and 42 percent for tax-exempt trusts. For organizations reporting positive amounts of UBT1, the ratio was 71 percent for corporate entities, compared to 17 percent for trusts.

Composition of UBI for Selected Types of Organizations

Section 401(a) plans, section 408(e) traditional IRAs, and section 501(c)(9) VEBAs invest their assets to produce income for their beneficiaries. Capital gain net income, combined partnership and S corporation income, and debt-financed income collectively accounted for 83 percent and 86 percent, respectively, of the sections 401(a) and 408(e) trusts' totals of gross UBI, as seen in Figure C. For section 501(c)(9) VEBAs, capital gain net income, combined partnership and S corporation income, and other types of investment income produced 97 percent of their total gross UBI. Other than capital gain net income and combined partnership and S corporation income, all investment income of VEBAs is reported as "investment income" on a special Form 990-T line. Any debt-financed income is included on this line and is not reported separately. (10)

Section 501 (c)(3) nonprofit charitable organizations reported $5.5 billion of gross UBI for 2004, of which 74 percent was attributable to gross profit from sales and services and advertising income, two main commercial activities reported on Form 990-T. Another 17 percent was a combined total of capital gain net income, partnership and S corporation income, and debt-financed income. While this investment income comprised a relatively small proportion of charities' total UBI, the amount reported by charities accounted for 66 percent of the total of these three items reported on Form 990-T overall. In addition, for the charities, the total amount of these items rose 73 percent between 2003 and 2004.

Section 501(c)(6) chambers of commerce, business leagues, and real estate boards grossed $1.1 billion of UBI for 2004, with gross profit from sales and services and advertising income accounting for 74 percent, and the total of capital gain net income, partnership and S corporation income (less loss), and debt-financed income accounting for only 4 percent. These organizations, many of which are business associations, also produced 7 percent of their gross UBI from "exploited exempt activities." When an exempt organization exploits its name recognition or reputation of goodwill to produce income, such as selling endorsements for commercial products, the income is subject to unrelated business income taxation. Section 501(c)(6) organizations were responsible for 44 percent of the total of exploited exempt activity income. (11)

Changes in Gross UBI Sources, 2003-2004

A review of gross UBI sources presented in Figure D shows that income from investments made significant gains between 2003 and 2004. Capital gain net income increased by 142 percent, combined income (less loss) from partnerships and S corporations increased by 90 percent, and unrelated debt-financed income increased by 17 percent. The four types of income generated from investment activities-capital gain net income, income (less loss) from partnerships and S corporations, unrelated debt-financed income, and investment income (less loss) of section 501(c)(7), (9), and (17) organizations-together accounted for 21 percent of total gross UBI.

The drop in aggregate investment income (less loss), which is reported only by section 501(c)(7), (9), and (17) organizations, is solely attributable to an organization that reported an atypically large amount of this type of income on its 2003 Form 990-T and a comparatively small amount on its 2004 form. To protect the organization from possible disclosure of identifiable tax information, adjusted totals cannot be provided in Figure D. However, if data from this outlier were excluded, the 2004 amount of aggregate investment income (less loss) would be significantly greater than the 2003 amount.

While not considered an investment-related income source, gross profit (less loss) from sales and services is typically the largest source of income for tax-exempt organizations overall, and its profitability as an unrelated business activity can be favorably affected when financial markets and the economy are strong. Gross profit (less loss) from sales and services increased by 8 percent between 2003 and 2004, from $4.5 billion to $4.9 billion. For 2004, it accounted for just over half of total gross UBI. Advertising services, the second largest source of UBI overall, produced an additional 15 percent of the total.

Nonprofit Charitable Organizations Classified by the National Taxonomy of Exempt Entities

Figure E presents information on categories of section 501(c)(3) nonprofit charitable organizations, based on the National Taxonomy of Exempt Entities (NTEE), a system developed by the National Center for Charitable Statistics, with the collaboration of major nonprofit entities. (12) This figure includes Tax Year 2004 estimates for all charities that filed Form 990/990-EZ "information" returns and the subset of these charities that additionally filed Form 990-T "tax" returns to report unrelated business income (UBI). (13) The NTEE system classifies organizations by institutional purpose and major programs and activities. It is comprised of 26 major groups, which are then aggregated into 10 categories. The organizations were coded on the basis of information provided on Form 990.

Estimates of Form 990-T data for section 501(c)(3) organizations shown in Figure E are lower than the estimates of these organizations' overall Form 990-T filings shown in Figure C and Table 1 at the end of this article because some tax-exempt entities are required to file Form 990-T, but not Form 990/990-EZ. These entities include section 501(c)(3) private foundations, most organizations with receipts less than $25,000, most colleges and universities operated by State and local governments, most churches, and certain other types of religious organizations.

The estimated 9,501 nonprofit charitable organizations with gross unrelated business income represent about 3 percent of the 276,199 section 501 (c)(3) organizations that filed Forms 990/990-EZ for 2004. A large variety of organizations with diverse nonprofit purposes are included in the nine aggregated NTEE major categories (excluding "unknown, unclassified") presented. While only 3 percent of charities, overall, produced UBI, the likelihood for engaging in unrelated business activities can vary significantly depending on the asset size of an organization. For example, a special Statistics of Income study using Tax Year 2003 Form 990-T data revealed that only about 1 percent of charities with assets under $100,000 had income from unrelated business activities, compared with 39 percent of organizations with assets of $50,000,000 or more. For other groupings of charities, within four midsize asset classes, the percentages ranged from 2 to 13, increasing progressively as asset size increased. (14)

"Health" was by far the largest category in terms of total income reported, both on Forms 990/990-EZ and Forms 990-T. Organizations within this category accounted for 57 percent of the $1,153.0 billion of revenue reported by all nonprofit charities. They also accounted for 68 percent of the $545.2 billion of total revenue, 56 percent of the $4.4 billion of gross UBI, and 48 percent of the $94.1 million of total tax reported by Form 990/990-EZ filers that also filed Form 990-T. Of the 36,372 charitable organizations in the health category, about 7 percent engaged in unrelated business activities, a larger share than that associated with any other category shown in Figure E, and they flied 26 percent of the 9,501 Forms 990-T on which UBI was reported. Form 990-T filers with mission-based health programs reported gross UBI that was less than 1 percent of their total revenues. The health category includes organizations that promote the wellness of individuals, the general treatment and prevention of disease or illness (including mental health and illness), and the medical rehabilitation of the physically disabled. Examples are hospitals; nursing or convalescent facilities; health care financing activities; substance abuse treatment services; organizations that study ethics or promote the practice of ethical behavior in medical care and research; health associations active in the prevention or treatment of diseases; and medical research.

The major category of "education" ranked second in the amounts of gross UBI and total tax reported and third in the number of returns filed. The shares of total revenue, gross UBI, and total tax attributable to the 1,319 joint Form 990 and Form 990-T filers in this category were 22 percent, 14 percent, and 22 percent, respectively. Unrelated business activities produced less than 1 percent of the $121.5 billion of total revenue reported by joint Forms 990/990-EZ and 990-T filers with educational purposes or programs. The education category includes higher education (excluding colleges and universities operated by State and local governments that are not required to file Form 990), elementary and secondary schools, correspondence schools, libraries, educational testing services, organizations providing opportunities for continuing education outside the framework of formal education, and student services and organizations.

Organizations classified within the NTEE-defined category of "human services" accounted for the largest number of organizations with UBI shown in Figure E, 28 percent of the total, but they were responsible for only 4 percent of total revenue, 9 percent of gross UBI, and 12 percent of total tax reported by nonprofit charitable organizations that filed both Form 990/990-EZ and Form 990-T. Gross UBI represented 2 percent of their $18.9 billion of total revenue. The human services category was comprised of organizations in several classifications performing a variety of services focused on specific needs within the community: housing and shelter programs, including housing, construction, management, and services to assist in locating, acquiring, or sustaining housing; job training and placement services; public safety, disaster preparedness, and relief services, including activities related to mitigating the effects of disasters and providing relief to accident victims; amateur sports activities and recreation and sports programs provided by organizations for camps, parks, and playgrounds; crime prevention and legal services; and multipurpose organizations providing a broad range of social or human services to individuals and families.

Summary

Between Tax Years 2003 and 2004, the "unrelated business" income tax (UBIT) liability of charitable and other types of tax-exempt organizations rose 66 percent. These organizations filed 38,040 Forms 990-T for Tax Year 2004 (Filing Years 2005 and 2006), about 5 percent more than the number filed for Tax Year 2003. They reported gross unrelated business income (UBI) of $9.5 billion and total deductions of $9.0 billion, resulting in unrelated business taxable income (less deficit) of $0.5 billion. Close to half of Form 990-T fliers reported positive unrelated business taxable income (UBTI), totaling $1.3 billion, an increase of 65 percent over the 2003 amount. After adjusting $364.6 million of UBIT with certain credits and other taxes, the total tax reported on Form 990-T was $367.7 million.

Key factors affecting the amount of UBTI reported each year on Form 990-T include the effect of market fluctuations on organizations with large amounts of unrelated business investment income; the organizational structure of an entity, as either a corporation or trust; each type of organization's applicable tax rates; and the interrelationship between total amounts of gross UBI and allowable deductions. In general, there is a clear distinction between organizations structured as corporations and trusts, with regard to the proportion of UBI attributable to investment income. The annual ratios of total investment income to total gross UBI reported on Forms 990-T from 1998 to 2004 ranged from 9 percent to 16 percent for tax-exempt corporations, and 83 percent to 97 percent for tax-exempt trusts. Tax-exempt trusts historically have been subject to higher marginal tax rates than corporate exempt entities, resulting in higher average UBIT liability amounts for the trusts. For each tax year from 1998 to 2004, the average UBIT liability of tax-exempt trusts was much larger than that of tax-exempt corporations, by twofold to sixfold. Additionally, tax-exempt corporate entities have a higher degree of flexibility in the allocation of administrative and operational expenses to their unrelated business activities compared to tax-exempt trusts, which, by the nature of their operations, are relatively limited in the types and amount of deductions they can claim to offset income. For each year in the 1998 to 2003 period, aggregate total deductions reported by corporate Form 990-T filers were between 95 percent and 105 percent of their total gross UB[. Tax-exempt trust fliers' total aggregate deductions were between 42 percent and 76 percent of their total gross UBI.

For Tax Year 2004, about 3 percent of the 276,199 IRC section 501(c)(3) nonprofit charitable organizations filing Forms 990/990-EZ also filed Forms 990-T. This article presents information on various categories of these filers, based on the National Taxonomy of Exempt Entities (NTEE), which classifies organizations by institutional purpose and major programs and activities. Organizations' tax-exempt missions related to health, education, and human services ranked first, second, and third, respectively, in terms of total revenue reported by all charitable organizations, and also in terms of total revenue, total gross UBI, UBTI, and total tax reported by charitable organizations that filed both Forms 990/990-EZ and 990-T. The proportion of total revenue produced from gross UBI by organizations within each of these three program categories was 2 percent or less.

Data Sources and Limitations

The Tax Year 2004 Statistics of Income (SOI) Form 990-T study incorporated a two-stage sample design consisting of a stratified random sample and a special "integrated" sample. The stratified random sample was designed to represent the entire population of Form 990-T filers reporting unrelated business income. The integrated sample was designed to gather information on "related" (tax-exempt) and "unrelated" (taxable) income and expenses for section 501 (c)(3) nonprofit charitable organizations that filed both Form 990 (or Form 990-EZ, the short-form version of this information return) and Form 990-T. This integrated sampling program ensured that the SOI sample of Forms 990-T included any unrelated business income tax returns (with gross UBI of $1,000 or more) filed by organizations whose Form 990 or Form 990-EZ information returns were selected for the separate SOI sample of section 501(c)(3) nonprofit charitable organizations. Organizations exempt under other Code sections were not subjected to the integrated sampling program.

The Form 990-T returns were initially divided into strata, based on gross UBI, and selected using Bernouli sampling. Section 501 (c)(3) returns not selected randomly were then linked, by Employer Identification Number (EIN), to returns in the Forms 990/990-EZ sample. These linked returns, along with any randomly selected Forms 990-T that also had counterparts in the Forms 990/990-EZ sample, formed the "integrated" IRC section 501 (c)(3) portion of the Form 990-T sample. (15)

Returns in the Form 990-T sample frame were classified into two-dimensional strata, based on the size of gross UBI in the Form 990-T population and the size of total assets in the section 501(c)(3) Form 990/990-EZ population of returns having EINs that matched Form 990-T EINs. As shown in Figure F, the designed sampling rates ranged from a minimum of 3.65 percent (Form 990-T gross UBI of $1,000 under than $20,000, with either no Form 990/990-EZ EIN match or an EIN match to a section 501(c)(3) Form 990/990-EZ with total assets under $1,000,000) to a maximum of 100 percent (either Form 990-T gross UBI of $500,000 or more, or Form 990-T with any amount of gross UBI and an EIN match to a section 501(c)(3) Form 990 with total assets of $50,000,000 or more). Other Forms 990-T were selected at designed rates ranging from 5.11 percent to 78.59 percent.

The population from which the Form 990-T sample was drawn consisted of Tax Year 2004 Form 990-T records posted to the IRS Business Master File system during 2005 and 2006. Returns filed after Calendar Year 2006 were not included in the sample, unless a return was considered a large income-size case (over $500,000 or more of gross UBI). A sample of 7,940 returns was selected from a population of 38,287. After excluding returns that were selected for the sample but later rejected, the resulting sample size was 7,905 returns, and the estimated population size was 38,040. Rejected returns included those that had gross UBI below the $1,000 filing threshold; were filed for a part-year 2004 accounting period, and a full-year 2004 return was also filed; or were filed for a part-year accounting period that began in a year other than 2004. For example, a final return filed for the 6-month period of January 2005-June 2005 may have been initially selected for the 2004 sample based on the criterion of an accounting period that ended between December 2004 and November 2005, but it was later rejected because, in actuality, it was a Tax Year 2005 return.

The information presented in this article was obtained from returns as originally filed with the Internal Revenue Service. The data were subjected to comprehensive testing and correction procedures in order to improve statistical reliability and validity. In most cases, due to time constraints, changes made to the original return as a result of administrative processing, audit procedures, or a taxpayer amendment were not incorporated into the database.

Because the data are based on a sample, they are subject to sampling error. In order to use these statistics properly, the magnitude of the sampling error, measured by the coefficient of variation (CV), should be taken into account. Figure G shows CVs for selected financial data estimates derived from the Form 990-T stratified random sample. A discussion of the reliability of estimates based on samples and methods for evaluating both the magnitude of sampling and nonsampling error and the precision of sample estimates can be found in the general Appendix, located near the back of this issue of the SOI Bulletin.

Explanation of Selected Terms

This section provides definitions for terms contained in the article and in Tables 1 through 7 at the end of the article. In some of the following explanations, tax-exempt organizations are cited by the Internal Revenue Code section under which they are described. The various types of tax-exempt organizations subject to the unrelated business income tax provisions are described by Code section in the Appendix to this article.

Advertising Income--Gross income realized by a tax-exempt organization from the sale of advertising in a periodical was gross income from an unrelated trade or business activity involving the "exploitation of an exempt activity," namely, the circulation and subscriber base of the periodical developed by producing and distributing the mission-related content of that periodical. Advertising income was reported separately from other types of "exploited exempt activity income." (See the explanation of Exploited Exempt Activity Income.) Internal Revenue Code section 501 (c)(7), (9), and (17) organizations reported gross advertising income, as well as other types of "exploited exempt activity income," as part of gross receipts from sales and services. All other organizations reported this income separately.

Capital Gain Net Income--Generally, organizations required to file Form 990-T (except organizations tax-exempt under Internal Revenue Code sections 501(c)(7), (9), and (17)) were not taxed on net gains from the sale, exchange, or other disposition of property. However, capital gain net income on sales of debt-financed property, certain gains on the cutting of timber (section 1231), and gains on sales of certain depreciable property (described in Internal Revenue Code sections 1245, 1250, 1252, 1254, and 1255) were considered taxable. Also, any gain or loss passed through from a partnership or S corporation, or any gain or loss on the disposition of S corporation stock by a "qualified tax-exempt" (defined in the explanation of Income (Less Loss) from Partnerships and S Corporations), was taxed as a capital gain or loss. (See the explanation of Investment Income (Less Loss) for information regarding investment income of section 501 (c)(7), (9), and (17) organizations.)

Contributions--To the extent permissible under the Internal Revenue Code, a deduction was allowed for contributions or gifts actually paid within the tax year to, or for the use of, another entity that was a charitable or Governmental organization described in Code section 170(c). A tax-exempt corporation was allowed a deduction for charitable contributions up to 10 percent of its unrelated business taxable income (UBTI) computed without regard to the deduction for contributions. A tax-exempt trust was generally allowed a deduction for charitable contributions under the rules applicable to individual taxpayers, except that the limit on the deduction was determined in relation to UBTI computed without regard to the contributions deduction, rather than in relation to adjusted gross income. Contributions in excess of the respective corporate or trust limitations may be carried over to the next 5 taxable years, subject to certain rules. The contributions deduction was allowed whether or not the donated income was directly connected with the carrying on of a trade or business.

Cost of Sales and Services--Cost of sales and services may have included depreciation, salaries and wages, and certain other types of deductible items. For this reason, the total amount shown for some of the separately reported components of total deductions, such as "salaries and wages," may be understated. Cost of sales and services was subtracted from gross receipts from sales and services in computing gross profit (less loss) from sales and services, which is a component of gross unrelated business income (UBI).

Deductions Directly Connected With Unrelated Business Income--These were deductions allowed in computing net income, if they otherwise qualified as income tax deductions under the Internal Revenue Code and if they had a "proximate and primary" relationship to carrying on an unrelated trade or business. Allowable deductions included those allocable to rental of personal property; those allocable to unrelated debt-financed income; those allocable to investment income of Internal Revenue Code section 501 (c)(7), (9), and (17) organizations; those allocable to interest, annuities, royalties, and rents received from "controlled organizations" (see definition of Income from Controlled Organizations); those allocable to "exploited exempt activity income" other than advertising; direct advertising costs; compensation of officers, directors, and trustees; salaries and wages; repairs and maintenance; bad debts; interest; taxes and licenses; depreciation (unless deducted elsewhere); depletion; contributions to deferred compensation plans; contributions to employee benefit plans; the "net operating loss deduction"; and "other deductions." Tax-exempt organizations with gross unrelated business income (UBI) above $10,000 were required to report each deduction component separately. Organizations with gross UBI between $1,000 (the filing threshold) and $10,000 reported a single total of the first five types of directly connected expenses listed above (those described as "allocable to") and a single total for all other types of deductions (both deductions directly connected with UBI and those not directly connected, each defined elsewhere in this section), except for two items that were required to be reported separately: the "net operating loss deduction" (directly connected) and the "specific deduction" (not directly connected), both also defined below.

Deductions Not Directly Connected With Unrelated Business Income--The component deductions were "set-asides," "excess exempt expenses," charitable contributions, and the "specific deduction." The specific deduction was reported, when applicable, by all organizations with positive taxable income; the other types of deductions not directly connected with UBI were reported separately, when applicable, only by tax-exempt organizations with gross UBI above $10,000. (See, also, the explanations of Set-Asides, Excess Exempt Expenses, Contributions, and the Specific Deduction.)

Excess Exempt Expenses--The two types of "excess" expenses allowed as deductions from unrelated business income were (1) excess exempt expenses attributable to commercial exploitation of exempt activities, and (2) excess exempt expenses attributable to advertising income. In the case of "exploited" exempt activity income (see the explanation of Exploited Exempt Activity Income, Except Advertising, below), if the expenses of the organization's exempt activity exceeded the income from the exempt activity, then the excess expenses could be used to offset any positive net unrelated business income produced from exploiting the exempt activity, to the extent that it did not result in a loss. Excess expenses of one type of commercially exploited exempt activity could not be used to offset income from another type of unrelated business activity, unless both types commercially exploited the same exempt activity. In the case of excess exempt expenses attributable to advertising income, if the expenses attributable to producing and distributing the readership content of a periodical exceeded the circulation income, then the excess of readership costs over circulation income could be used to offset any net gain from advertising (gross advertising income less direct advertising costs), to the extent that it did not result in a loss.

Exploited Exempt Activity Income, Except Advertising-In some cases, exempt activities create goodwill or other intangibles that are capable of being exploited in a commercial manner. When an organization exploited such an intangible in commercial activities that did not contribute importantly to the accomplishment of an exempt purpose, the income it produced was gross income from an unrelated trade or business. An example of this type of activity would be an exempt scientific organization with an excellent reputation in the field of biological research that exploits its reputation regularly by selling endorsements of laboratory equipment to manufacturers. Endorsing laboratory equipment would not have contributed importantly to the accomplishment of any purpose for which tax exemption was granted to the organization. Accordingly, the income from selling such endorsements is gross unrelated business income. Exploited exempt activity income from advertising was reported separately from other types of exploited exempt activity income (see the explanation of Advertising Income). Internal Revenue Code section 501(c)(7), (9), and (17) organizations reported income from exploited exempt activities as part of gross receipts from sales and services. All other organizations reported this income separately.

Gross Profit (Less Loss)from Sales and Services-This was the gross profit (less loss) from any unrelated trade or business regularly carried on that involved the sale of goods or performance of services. Gross profit (less loss) from sales and services is computed as gross receipts from sales or services, less returns and allowances, minus cost of sales and services.

Gross Unrelated Business Income (UBI)--This was the total gross unrelated business income prior to reduction by allowable deductions used in computing unrelated business taxable income. All organizations were required to report detailed sources of gross UBI. The components of gross UBI were gross profit (less loss) from sales and services; capital gain net income; net gain (less loss) from sales of non-capital assets; net capital loss deduction (trusts only); income (less loss) from partnerships and S corporations; rental income; unrelated debt-financed income; investment income (less loss) of Internal Revenue Code section 501(c)(7), (9), and (17) organizations; income (annuities, interest, rents, and royalties) from controlled organizations; "exploited exempt activity" income, except advertising; advertising income; and "'other" income (less loss). (For an explanation of these sources of income, see the separate explanations of each component.)

A tax-exempt organization's income was treated as unrelated business income if it was from a trade or business that was regularly carried on by the organization and that was not substantially related to the performance of the organization's exempt purpose or function (other than that the organization needed the profits derived from the unrelated activity). The term "trade or business" generally comprised any activities carried on for the production of income from selling goods or performing services. These activities did not lose their identity as trades or businesses merely because they were carried on within a larger aggregate of similar activities or within a larger complex of other endeavors that may, or may not, have been related to the exempt purposes of the organization. For example, soliciting, selling, or publishing commercial advertising is identified as a trade or business even though the advertising is published in an exempt organization's periodical that contains editorial material related to the organization's exempt purpose.

Income from Controlled Organizations--When an exempt organization controlled another organization, the entire amount of gross annuities, interest, rents, and royalties (termed "specified payments") received from the controlled organization were included in the gross UBI of the controlling organization. They were included only to the extent that the specified payments were claimed as a deduction from the controlled organization's own UBI (in the case of an exempt controlled organization) or the "equivalent" of UBI (in the case of a nonexempt controlled organization). The equivalent of UBI was computed as if the nonexempt controlled organization were exempt and had the same exempt purpose as the controlling organization. "Control" meant: (a) for a stock corporation, the ownership (by vote or value) of more than 50 percent of the stock; (b) for a partnership, ownership of more than 50 percent of the profits or capital interests; or (c) for any other organization, ownership of more than 50 percent of the beneficial interests. All deductions "directly connected" with a Form 990-T filer's gross controlled-organization income were allowed. The rules for debt-financed property did not apply to passive income (generally, investment income) from controlled organizations. (See the definition of Unrelated Debt-Financed Income.)

Income (Less Loss),from Partnerships and S Corporations If an organization was a partner in any partnership that carried on an unrelated trade or business, this income item included the organization's share of partnership gross unrelated business income less its share of partnership deductions that were directly connected with the unrelated income. If an organization was a "qualified tax-exempt" that held stock in an S corporation, this income item included the income or loss from the stock interest. The stock interest was treated as an unrelated trade or business, and all items of income, loss, or deduction were taken into account in computing unrelated business taxable income. A "qualified tax-exempt" was an organization described in Internal Revenue Code section 401(a) (qualified stock bonus, pension, or profit-sharing plan) or section 501(c)(3), and exempt from tax under section 501 (a).

Investment Income (Less Loss)--This income was reported only by organizations exempt under Internal Revenue Code sections 501(c)(7), (9), and (17) and included such income as gross unrelated debt-financed income, gross income from the ownership or sale of securities, and set-asides deducted from investment income in previous years that were subsequently used for a purpose other than that for which a deduction was allowed. (See, also, the explanation of Set-Asides.) All gross rents (except those that were exempt-function income) from investment property of section 501 (c)(7), (9), and (17) organizations were treated as unrelated business income and were reported as "rental income." Organizations exempt under sections other than 501 (c)(7), (9), and (17) did not report "'investment income (less loss)." Generally, these organizations' investment income (dividends, interest, rents, and annuities) and royalty income were not taxed as unrelated business income, unless it was income, other than dividends, from a controlled organization or debt-financed income, or the rents were of the type described in the explanation of rental income. (See explanations of Income from Controlled Organizations, Rental Income, and Unrelated Debt-Financed Income.)

Net Capital Loss (Trusts Only)--If a trust had a net loss from sales or exchanges of capital assets, it was allowed a deduction for the amount of the net loss or $3,000, whichever was lower. (Tax-exempt corporations were not allowed to deduct any excesses of capital losses over capital gains.) Tax-exempt trusts reported the net capital loss deduction on Form 990-T as a component of gross unrelated business income, and it was subtracted when computing total gross UBI.

Net Gain (Less Loss), Sales of Noncapital Assets--This was the gain or loss from the sale or exchange of business property, as reported on Form 4797, Sales of Business Property. Property other than capital assets generally included property of a business nature, in contrast to personal and investment properties, which were capital assets.

Net Operating Loss Deduction (NOLD)--The net operating loss carryover or carryback (as described in Internal Revenue Code section 172) was allowed as a deduction (limited to the current-year excess of receipts over deductions, prior to applying the NOLD) in computing unrelated business taxable income. However, the net operating loss carryover or carryback (allowed only to or from a tax year for which the organization was subject to tax on unrelated business income) was determined without taking into account any amount of exempt-function income or deductions that had been excluded from the computation of unrelated business taxable income. A "net operating loss" represented the excess of deductions over receipts for a specified year for which an organization reported an overall deficit from its unrelated trade or business activities. The net operating loss deduction statistics in this article represent only net operating loss carryovers from prior years because carrybacks from future years would be reported in a later year on an amended return, not on the return as initially filed (which served as the basis for the statistics).

Other Deductions--This included all types of unrelated business deductions that were not specifically required to be reported elsewhere on the tax return. Examples are fees for accounting, legal, consulting, or financial management services; insurance costs (if not for employee-related benefits); equipment costs; mailing costs; office expenses, such as janitorial services, supplies, or security services; rent; travel expenses; educational expenses; and utilities.

Other Income (Less Loss)--This included all types of unrelated business income that were not specifically required to be reported elsewhere on the tax return. Examples are insurance benefit fees; member support fees; commissions; returned contributions that were deducted in prior years; income from insurance activities that was not properly set aside in prior years; recoveries of bad debts; and refunds of State or local government tax payments, if the payments were previously reported as a deduction.

Proxy Tax--This was a tax on certain nondeductible lobbying and political expenditures. A membership organization that was tax-exempt under Internal Revenue Code sections 501 (c)(4), 501(c)(5), or 501 (c)(6) was liable for the proxy tax if the organization did not notify its members of the shares of their dues that were allocated to the nondeductible lobbying and political expenditures, or if the notice did not include the entire amount of dues that was allocated. The proxy tax was computed as 35 percent of the aggregate amount of nondeductible lobbying expenditures that was not included in the notices sent to the organization's members. The proxy tax was required to be reported on Form 990-T and was included in total tax; however, there was no connection between the proxy tax and the taxation of income from an organization's unrelated business activities.

Rental Income--For organizations tax-exempt under Internal Revenue Code sections other than 501(c)(7), (9), and (17), this was the amount of(l) gross rents from personal property (e.g., computer equipment or furniture) leased with real property, if the rental income from the personal property was more than 10 percent, but not more than 50 percent, of the total rents from all leased property; or (2) gross rents from both real property and personal property leased with real property if the personal property was more than 50 percent of the total rents from all leased property. Except for the second situation described above, gross rents from real property were generally excluded in computing unrelated business taxable income. In addition, gross rents from personal property that did not exceed 10 percent of the total rents from all leased property were not included in gross UBI. Any rents not covered by the explanation of "rental income" had to be considered in terms of their taxability as unrelated business income from controlled organizations or unrelated debt-financed income, in that order. For organizations tax-exempt under sections 501(c)(7), (9), and (17), rental income included all gross rents (except those that were exempt-function income), with no exclusions. (See explanations of Income from Controlled Organizations and Unrelated Debt-Financed Income.)

Set-Asides--This deduction from investment income was allowed to social and recreational clubs (Internal Revenue Code section 501 (c)(7)), voluntary employees' beneficiary associations (section 501 (c)(9)), and supplemental unemployment benefit trusts (section 501(c)(17)). The deduction was equal to the amount of passive income (generally, investment income) that these organizations set aside (1) to use for charitable purposes or (2) to provide payment of life, health, accident, or other insurance benefits (section 501(c)(9) and (17) organizations only). However, any amounts set aside that exceeded the "qualified asset account" limit, as figured under section 419A, were not allowed as a deduction from unrelated business investment income; they were treated as taxable investment income. A section 419A qualified asset account is any account consisting of assets set aside to provide for the payment of disability benefits, medical benefits, severance pay benefits, or life insurance benefits.

Specific Deduction The specific deduction was $1,000 or the amount of positive taxable income, whichever was less. The amount deducted was considered "not directly connected" with gross unrelated business income and was allowed to all organizations that had positive taxable income after all other types of deductions were taken. This deduction provided the equivalent benefit of the $1,000 gross unrelated business income filing threshold under which some organizations were exempted from filing a return and paying the unrelated business income tax. (See, also, the explanation of Deductions Not Directly Connected With Unrelated Business Income.)

Total Deductions--Total deductions included both deductions reported on the main part of Form 990-T and expense items reported on any of six supporting schedules, which were also part of the tax form. They excluded cost of sales and services, which was subtracted from gross receipts from sales and services in computing gross profit (less loss) from sales and services, which is a component of gross unrelated business income (UBI). (See the explanation of Cost of Sales and Services.)

Total Tax--Total tax was unrelated business income tax less the foreign tax credit, general business credit, credit for prior-year minimum tax, and other allowable credits, plus the ~proxy tax" on certain lobbying and political expenditures, the "'alternative minimum tax," and "'other" taxes.

Unrelated Business Activity--A business activity is considered unrelated if it does not contribute importantly (other than the production of funds) to accomplishing an organization's charitable, educational, or other purpose that is the basis for the organization's tax exemption. In determining whether activities contribute importantly to the accomplishment of an exempt purpose, the size, extent, and nature of the activities involved must be considered in relation to the size, extent, and nature of the exempt function that they intend to serve. To the extent 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 needed to accomplish the exempt purpose is an unrelated trade or business. Whether an activity contributes importantly depends in each case on the facts involved. See IRS Publication 598, Tax on Unrelated Business Income of Exempt Organizations, for additional information on unrelated business income and tax.

The following is a case example from Publication 598. An American folk art museum operates a shop in the museum that sells reproductions of works in the museum's own collection and also works from the collections of other art museums. In addition, the museum sells souvenir items depicting the city where the museum is located. The sale of the reproductions, regardless of which museum houses the original works, is considered to be "related" because it contributes importantly to the achievement of the museum's exempt educational purpose by making works of art familiar to a broader segment of the public, thereby enhancing the public's understanding and appreciation of art. However, the sale of souvenir items depicting the city in which the museum is located is considered to be "unrelated" because it has no causal relationship to art or to artistic endeavor, and, therefore, does not contribute importantly to the accomplishment of the museum's exempt educational purposes.

Unrelated Business Income (UBI)--See definition of Gross Unrelated Business Income (UBI).

Unrelated Business Income Tax--This was the tax imposed on unrelated business taxable income. It was determined based on the regular corporate or trust income tax rates that were in effect for Tax Year 2004, as shown in the following schedules. Trusts that were eligible for the maximum 28-percent tax rate on capital gain net income figured their tax based on Schedule D of Form 1041, U.S. Income Tax Return for Estates and Trusts.

Tax Rates for Corporations

Amount of unrelated business taxable income is:
 Of the
 But not amount
 Over-- over-- Tax is: over--

 $0 $50,000 15% $0
 50,000 75,000 $7,500 + 25% 50,000
 75,000 100,000 13,750 + 34% 75,000
 100,000 335,000 22,250 + 39% 100,000
 335,000 10,000,000 113,900 + 34% 335,000
10,000,000 15,000,000 3,400,000 + 35% 10,000,000
15,000,000 18,333,333 5,150,000 + 38% 15,000,000
18,333,333 0 35% 0


Tax Rates for Trusts

Amount of unrelated business taxable income is:
 Of the
 But not amount
Over-- over-- Tax is: over--

 $0 $1,950 15% $0
1,900 4,600 $292.50 + 25% 1,950
4,500 7,000 955 + 28% 4,600
6,850 9,550 1,627 + 33% 7,000
9,350 -- 2,468.50 + 35% 9,550


Unrelated Business Taxable Income (Less Deficit)--This was gross income derived from any unrelated trade or business regularly carried on by an exempt organization, less deductions directly connected with carrying on the trade or business and less other allowable deductions not directly connected. On a return-by-return basis, the result of this computation was either positive (unrelated business taxable income), negative (deficit), or zero. Taxable income was subject to the unrelated business income tax. (See, also, explanations of Deductions Directly Connected With Unrelated Business Income and Deductions Not Directly Connected With Unrelated Business Income.)

Unrelated Debt-Financed Income--Gross income from investment property for which acquisition indebtedness was outstanding at any time during the tax year was subject to the unrelated business income (UBI) tax. The percentage of investment income to be included as gross UBI was proportional to the ratio of average acquisition indebtedness to the average adjusted basis of the property. Various types of passive income (generally, investment income) were considered to be unrelated debt-financed income, but only if the income arose from property acquired or improved with borrowed funds and if the production of income was unrelated to the organization's tax-exempt purpose. When any property held for the production of income by an organization was disposed of at a gain during the tax year, and there was acquisition indebtedness outstanding at any time during the 12-month period prior to the date of disposition, the property was considered debt-financed property, and the gain was treated as unrelated debt-financed income. Income from debt-financed property did not include rents from personal property (e.g., computers or furniture) leased with real property, certain passive income (generally, investment income) from controlled organizations, and other amounts that were otherwise included in computing unrelated business taxable income. Internal Revenue Code section 501(c)(7), (9), and (17) organizations reported all debt-financed income as "Investment Income (Less Loss)." All other organizations reported debt-financed income separately.
Appendix
Types of Tax-Exempt Organizations Subject to the Unrelated
Business Income Tax Provisions, by Internal Revenue Code Section

 Code
 section Description of organization

 220(e) Archer Medical Savings Accounts (MSA's)

 401(a) Qualified pension, profit-sharing, or stock bonus
 plans

 408(e) Traditional Individual Retirement Accounts (IRA's)

 408A Roth Individual Retirement Accounts (IRA's)

501(c)(2) Title-holding corporations for exempt organizations

 (3) Religious, educational, charitable, scientific, or
 literary organizations, organizations that test for
 public safety. Also, organizations that prevent cruelty
 to children or animals, or foster national or
 international amateur sports competition

 (4) Civic leagues, social welfare organizations, and local
 associations of employees

 (5) Labor, agricultural, and horticultural organizations

 (6) Business leagues, chambers of commerce, real
 estate boards, and like organizations

 (7) Social and recreational clubs

 (8) Fraternal beneficiary societies and associations

 (9) Voluntary employees' beneficiary associations
 (including Federal employees' voluntary beneficiary
 associations formerly covered by section 501(c)(10))

 (10) Domestic fraternal beneficiary societies and
 associations

 (11) Teachers' retirement fund associations

501(c)(12) Benevolent life insurance associations, mutual ditch
 or irrigation companies, mutual or cooperative
 telephone companies, and like organizations

 (13) Cemetery companies

 (14) State-chartered credit unions and mutual insurance
 or reserve funds

 (15) Mutual insurance companies or associations other
 than life, if written premiums for the year do not
 exceed $350,000

 (16) Corporations organized to finance crop operations

 (17) Supplemental unemployment benefit trusts

 (18) Employee-funded pension trusts (created before
 June 25, 1959)

 (19) Posts or organizations of past or present members
 of the armed forces

 (21) Black Lung Benefit Trusts

 (22) Withdrawal liability payment funds

 (23) Associations of past and present members of the
 armed forces founded before 1880

 (24) Trusts described in section 4049 of the Employee
 Retirement Income Security Act of 1974

 (25) Title-holding corporations or trusts with no more than
 35 shareholders or beneficiaries and only one class
 of stock or beneficial interest

 (26) State-sponsored high-risk health insurance plans

501(c)(27) State-sponsored workers' compensation reinsurance
 plans

 529(a) Qualified State Tuition Plans

 530(a) Coverdell Education Savings Accounts

 Code
 section General nature of activities

 220(e) Fiduciary agent for accounts used in conjunction
 with high-deductible health insurance plans to save
 funds for future medical expenses

 401(a) Fiduciary agent for pension, profit-sharing, or stock
 bonus plans

 408(e) Fiduciary agent for retirement funds

 408A Fiduciary agent for retirement funds; subject to same
 rules as traditional IRA's, except contributions are
 not tax deductible and qualified distributions are tax
 free

501(c)(2) Holding title to property for exempt organizations

 (3) Activities of a nature implied by the description of the
 class of organization

 (4) Promotion of community welfare and activities from
 which net earnings are devoted to charitable,
 educational, or recreational purposes

 (5) Educational or instructive groups whose purpose is
 to improve conditions of work, products, and
 efficiency

 (6) Improving conditions in one or more lines of
 business

 (7) Pleasure, recreation, and social activities

 (8) Lodges providing for payment of life, health,
 accident, or other insurance benefits to members

 (9) Providing for payment of life, health, accident, or
 other insurance benefits to members

 (10) Lodges, societies, or associations devoting their net
 earnings to charitable, fraternal, and other specified
 purposes, without life, health, or accident insurance
 benefits to members

 (11) Fiduciary associations providing for payment of
 retirement benefits

501(c)(12) Activities of a mutually beneficial nature implied by
 the description of the class of organization

 (13) Arranging for burials and incidental related activities

 (14) Providing loans to members or providing insurance
 of, or reserve funds for, shares or deposits in certain
 banks or loan associations

 (15) Providing insurance to members, substantially at
 cost

 (16) Financing crop operations in conjunction with
 activities of a marketing or purchasing association

 (17) Fiduciary agent for payment of supplemental
 unemployment compensation benefits

 (18) Providing for payments of benefits under a pension
 plan funded by employees

 (19) Providing services to veterans or their dependents;
 advocacy of veteran's issues; and promotion of
 patriotism and community service programs

 (21) Providing funds to satisfy coal mine operators'
 liability for disability or death due to black lung
 disease

 (22) Providing funds to meet the liability of employers
 withdrawing from a multiple-employer pension fund

 (23) Providing insurance and other benefits to veterans or
 their dependents

 (24) Providing funds for employee retirement income

 (25) Acquiring real property and remitting all income
 earned from such property to one or more exempt
 organizations, pension, profit-sharing, or stock
 bonus plans; or governmental units

 (26) Providing coverage for medical care on a not-for-
 profit basis to residents with pre-existing medical
 conditions that resulted in denied or exorbitantly
 priced traditional medical care coverage

501(c)(27) Pooled employers' funds providing reimbursements
 to employees for losses arising under workers'
 compensation acts, also, State-created, -operated,
 and -controlled organizations providing workers'
 compensation insurance to employers

 529(a) State- and agency-maintained plans that allow
 individuals to purchase credits or certificates, or
 make contributions to an account, to pay for future
 educational expenses

 530(a) Fiduciary agent for accounts created for the purpose
 of paying qualified higher education expenses of a
 designated beneficiary

NOTES: Corporations that are organized under an Act of Congress, and
are instrumentalities of the United States, described in section 501
(c)(1) of the Internal Revenue Code, are not subject to unrelated
business income taxation. Prepaid legal service funds, previously
described in section 501(c)(20) of the Internal Revenue Code, were
no longer tax exempt effective for tax years beginning after June
30, 1992.


(1) The unrelated business income tax (UBIT) was imposed on the portion of a tax-exempt organization's income produced from a trade or business that was conducted on a regular basis and was not substantially related to the organization's tax-exempt mission. After reducing gross income by allowable deductions, any resulting positive net income was subject to UBIT.

(2) See the definition of Proxy Tax in the Explanation of Selected Terms section of this article The proxy tax of $43 million shown in the total tax computation is only that reported by Form 990-T filers with gross unrelated business income above the $1.000 filing threshold, a criterion for selection into the Statistics of Income (SOI) sample. Proxy tax reported by organizations that had no UBI or those that had UBI below the filing threshold is not included. According to IRS Business Returns Transactions File records, total proxy tax of $8.1 million was reported on Forms 990-T for Tax Year 2004.

(3) See the definition of Unrelated Business Activity in the Explanation of Selected Terms section of this article for more information.

(4) The corporate and trust tax-rate schedules tot Tax Year 2004 are included in the definition of Unrelated Business Income "Fax, found in the Explanation of Selected Terms section of this article.

(5) Churches, which are tax-exempt under Internal Revenue Code section 501(c)(3), are not required to apply for exemption unless they desire to obtain an Internal Revenue Service ruling, and they do not have to file a Form 090 information return However, these churches are required to file Form 990-T if riley received $1,000 or more of gross income from business activities that were considered unrelated to their religious purposes. Internal Revenue Code section 4947(a)(1) "nonexempt charitable trusts" and section 4947(a)(2) "split-interest trusts" are required to report unrelated business income on Form 1041, Estate and Trust Income Tax Return, rather than Form 990-T. Published statistical reports on charitable and other nonprofit organizations, private foundations, and split-interest trusts are available from the Tax Stats pages of the IRS Web site at http://www.irsgov/taxstats.

(6) See Riley Margaret. "Unrelated Business Income Tax Returns, 2002: Financial Highlights and Special Analyses of Exempt-Organization Reporting Quality," Statistic of Income Bulletin, Winter 2005-2006. Volume 25. Number 3. This report, along with statistical tables in Excel format, is available from the Tax Stats pages of the IRS Web site at http://www.irs.gov/taxstats.

(7) See the Explanation of Terms section for definitions of these income sources. In addition to Federal taxation of unrelated business activities of a commercial nature, some organizations are also taxed on their investment incomes. All investment income of sections 501(c)(7). (9). and (17) organizations is considered unrelated business income and taxed accordingly. Other exempt organizations' investment income ordinarily is not taxed, unless the investment was purchased with borrowed funds; i.e., debt-financed

(8) Rental income is not considered a type of investment income in this article because gross rents from real property were generally excluded in computing unrelated business taxable income (UBTI). The following were considered taxable as UBI: (I) gross rents from personal property (e.g., computer equipment or furniture) leased with real property, if the rental income from the personal property was more than 10 percent, but not more than 50 percent, of the total rents from all leased property: or (2) gross rents from both real property and personal property leased with real property, if the personal property was more than 50 percent of the total rents from all leased property. See the definition of Rental Income in the Explanation of Selected Terms section of this article.

(9) The terms "nonprofit charitable organizations" and "charities," used in this article, refer to tax-exempt organizations with purposes that ale charitable, educational, scientific, literary, or religious in nature, or organizations that test for public safety or present cruelty to children or animals

(10) Section 501(c)(7), (9), and (17) organizations report capital gain net income and combined partnership and S corporation income separately, but include debt-financed income and other types of investment income on the "investment income" line specifically designated for these organizations. All other types of exempt organizations report capital gain net income, combined partnership and S corporation income, and debt-financed income separately on Form 990-T.

(11) Another 47 percent of exploited exempt activity income was attributable to section 501(c)(3) charities.

(12) For information on the National Taxonomy of Exempt Entities classification system, see the National Center for Charitable Statistics Web site: www.ncc.urban.org.

(13) For a more extensive analysis of all nonprofit charitable organizations classified by NTEE category, see Arnsberger, Paul D, "Charities, Social Welfare, and Other Tax-Exempt Organizations, 2004," Statistics of Income Bulletin, Fall 2007, Volume 27, Number 2, pp. 214-215, This report is available from the Tax Stats pages of the IRS Web site at http://www.irs.gov/taxstats.

(14) See Riley, Margaret, "Unrelated Business Income Tax Returns, 2003: Financial Highlights and A Special Analysis of Nonprofit Charitable Organizations' Revenue and Taxable Income," Statistics of Income Bulletin, Winter 2006-2007, Volume 26, Number 3. This report is available from the Tax Stats pages of the IRS Web site at http://www.irs.gov/taxstats.

(15) For additional information on the Forms 990 and 990-T integrated sample design, see Harte, James M. and Cecelia H. Hilgert (1993), "Enriching One Sample While Improving Another: Linking Differently Stratified Samples of Documents Filed by Exempt Organizations," Turning Administrative System Into Information Systems, Statistics of Income.

Margaret Riley is a statistician with the Special Studies Special Projects Section. This article was prepared under the direction of Barry W. Johnson, Chief
Table 1. Number of Returns, Gross Unrelated Business Income (UBI),
Total Deductions, Unrelated Business Taxable Income (Less Deficit),
Unrelated Business Taxable Income, and Total Tax, by Type of
Tax-Exempt Organization, Tax Year 2004

[All figures are estimates based on samples--money amounts are
in thousands of dollars]

Type of tax-exempt organization, Number Gross
 as defined by Internal Revenue of unrelated
 Code section returns business
 income (UBI)

 (1) (2)

All organizations 38,040 9,492,228
220(e) Archer Medical Savings
 Accounts 0 0
401(a) Qualified pension,
 profit-sharing, or stock bonus
 plans 339 16,716
408(e) Traditional Individual
 Retirement Accounts 4,272 45,507
408(A) Roth Individual
 Retirement Accounts * 66 * 4,603

501(c)(2) Title-holding
 corporations for exempt
 organizations [6] 348 109,068
501(c)(3) Religious,
 educational, charitable,
 scientific, or literary
 organizations 12,395 5,500,597
501(c)(4) Civic leagues and
 social welfare organizations 1,712 625,307
501(c)(5) Labor, agricultural,
 and horticultural
 organizations 2,418 300,659
501(c)(6) Business leagues,
 chambers of commerce, and
 real estate boards 6,230 1,074

501(c)(7) Social and
 recreational dubs 6,215 614,775
501(c)(8) Fraternal beneficiary
 societies and associations 775 64,363
501(c)(9) Voluntary employees'
 beneficiary associations 766 632,103
501(c)(10) Domestic fraternal
 beneficiary societies and
 associations 375 26,297
501(c)(11) Teachers' retirement
 fund associations 0 0

501(c)(12) Benevolent life
 insurance associations and
 certain mutual companies 270 85,710
501(c)(13) Cemetery companies * 51 * 4,383
501(c)(14) State-chartered
 credit unions 161 72,636
501(c)(15) Mutual insurance
 companies d d
501(c)(16) Corporations
 organized to finance crop
 operations 0 0

501(c)(17) Supplemental
 unemployment benefit trusts 0 0
501(c)(18) Employee-funded
 pension trusts * 7 2,103
501(c)(19) War veterans' posts
 or organizations 1,608 156,286
501(c)(21) Black Lung Benefit
 Trusts [7] 0 0
501(c)(22) Withdrawal liability
 payment funds 0 0

501(c)(23) Veterans'
 associations founded
 before 1880 0 0
501(c)(24) Trusts described in
 section 4049 of ERISA 0 0
501(c)(25) Title-holding
 companies with no more than
 35 shareholders d d
501(c)(26) High-risk health
 insurance plans 0 0
501(c)(27) Workers' compensation
 reinsurance plans d d

529(a) Qualified State Tuition
 Plans d d
530(a) Coverdell Education
 Savings Accounts 0 0

 Total
Type of tax-exempt organization, deductions [1,2]
 as defined by Internal Revenue
 Code section

 Number of Amount
 returns

 (3) (4)

All organizations 37,883 8,979,863
220(e) Archer Medical Savings
 Accounts 0 0
401(a) Qualified pension,
 profit-sharing, or stock bonus
 plans 317 78,509
408(e) Traditional Individual
 Retirement Accounts 4,224 11,564
408(A) Roth Individual
 Retirement Accounts * 65 * 891

501(c)(2) Title-holding
 corporations for exempt
 organizations [6] 348 127,229
501(c)(3) Religious,
 educational, charitable,
 scientific, or literary
 organizations 12,384 5,388,374
501(c)(4) Civic leagues and
 social welfare organizations 1,706 632,287
501(c)(5) Labor, agricultural,
 and horticultural
 organizations 2,418 300,239
501(c)(6) Business leagues,
 chambers of commerce, and
 real estate boards 6,173 1,005,847

501(c)(7) Social and
 recreational dubs 6,207 584,715
501(c)(8) Fraternal beneficiary
 societies and associations 775 64,575
501(c)(9) Voluntary employees'
 beneficiary associations 760 414,059
501(c)(10) Domestic fraternal
 beneficiary societies and
 associations 375 26,823
501(c)(11) Teachers' retirement
 fund associations 0 0

501(c)(12) Benevolent life
 insurance associations and
 certain mutual companies 270 85,227
501(c)(13) Cemetery companies 51 3,374
501(c)(14) State-chartered
 credit unions 161 88,393
501(c)(15) Mutual insurance
 companies d d
501(c)(16) Corporations
 organized to finance crop
 operations 0 0

501(c)(17) Supplemental
 unemployment benefit trusts 0 0
501(c)(18) Employee-funded
 pension trusts * 7 1,934
501(c)(19) War veterans' posts
 or organizations 1,608 160,349
501(c)(21) Black Lung Benefit
 Trusts [7] 0 0
501(c)(22) Withdrawal liability
 payment funds 0 0

501(c)(23) Veterans'
 associations founded
 before 1880 0 0
501(c)(24) Trusts described in
 section 4049 of ERISA 0 0
501(c)(25) Title-holding
 companies with no more than
 35 shareholders d d
501(c)(26) High-risk health
 insurance plans 0 0
501(c)(27) Workers' compensation
 reinsurance plans d d

529(a) Qualified State Tuition
 Plans d d
530(a) Coverdell Education
 Savings Accounts 0 0

 Unrelated
 business
Type of tax-exempt organization, taxable income
 as defined by Internal Revenue (less deficit) [3]
 Code section

 Number of Amount
 returns

 (5) (6)

All organizations 30,122 612,364
220(e) Archer Medical Savings
 Accounts 0 0
401(a) Qualified pension,
 profit-sharing, or stock bonus
 plans 314 88,652
408(e) Traditional Individual
 Retirement Accounts 4,220 33,943
408(A) Roth Individual
 Retirement Accounts * 49 * 3,712

501(c)(2) Title-holding
 corporations for exempt
 organizations [6] 307 -18,161
501(c)(3) Religious,
 educational, charitable,
 scientific, or literary
 organizations 9,708 112,223
501(c)(4) Civic leagues and
 social welfare organizations 1,075 -6,980
501(c)(5) Labor, agricultural,
 and horticultural
 organizations 1,840 420
501(c)(6) Business leagues,
 chambers of commerce, and
 real estate boards 4,256 68,602

501(c)(7) Social and
 recreational dubs 5,257 30,060
501(c)(8) Fraternal beneficiary
 societies and associations 571 -212
501(c)(9) Voluntary employees'
 beneficiary associations 494 218,044
501(c)(10) Domestic fraternal
 beneficiary societies and
 associations 293 -526
501(c)(11) Teachers' retirement
 fund associations 0 0

501(c)(12) Benevolent life
 insurance associations and
 certain mutual companies 230 483
501(c)(13) Cemetery companies 45 101
501(c)(14) State-chartered
 credit unions 151 -15,757
501(c)(15) Mutual insurance
 companies d d
501(c)(16) Corporations
 organized to finance crop
 operations 0 0

501(c)(17) Supplemental
 unemployment benefit trusts 0 0
501(c)(18) Employee-funded
 pension trusts * 6 * 169
501(c)(19) War veterans' posts
 or organizations 1,273 -4,063
501(c)(21) Black Lung Benefit
 Trusts [7] 0 0
501(c)(22) Withdrawal liability
 payment funds 0 0

501(c)(23) Veterans'
 associations founded
 before 1880 0 0
501(c)(24) Trusts described in
 section 4049 of ERISA 0 0
501(c)(25) Title-holding
 companies with no more than
 35 shareholders d d
501(c)(26) High-risk health
 insurance plans 0 0
501(c)(27) Workers' compensation
 reinsurance plans d d

529(a) Qualified State Tuition
 Plans d d
530(a) Coverdell Education
 Savings Accounts 0 0

 Unrelated business taxable
Type of tax-exempt organization, income [4]
 as defined by Internal Revenue
 Code section
 Number of Amount
 returns

 (7) (8)

All organizations 18,099 1,287,972
220(e) Archer Medical Savings
 Accounts 0 0
401(a) Qualified pension,
 profit-sharing, or stock bonus
 plans 288 89,726
408(e) Traditional Individual
 Retirement Accounts 4,174 34,013
408(A) Roth Individual
 Retirement Accounts * 49 * 3,712

501(c)(2) Title-holding
 corporations for exempt
 organizations [6] 79 6,655
501(c)(3) Religious,
 educational, charitable,
 scientific, or literary
 organizations 4,793 636,103
501(c)(4) Civic leagues and
 social welfare organizations 463 20,620
501(c)(5) Labor, agricultural,
 and horticultural
 organizations 775 28,212
501(c)(6) Business leagues,
 chambers of commerce, and
 real estate boards 2,173 129,657

501(c)(7) Social and
 recreational dubs 3,766 71,233
501(c)(8) Fraternal beneficiary
 societies and associations 324 5,044
501(c)(9) Voluntary employees'
 beneficiary associations 354 237,332
501(c)(10) Domestic fraternal
 beneficiary societies and
 associations 90 1,822
501(c)(11) Teachers' retirement
 fund associations 0 0

501(c)(12) Benevolent life
 insurance associations and
 certain mutual companies 148 9,670
501(c)(13) Cemetery companies 37 1,066
501(c)(14) State-chartered
 credit unions 111 4,982
501(c)(15) Mutual insurance
 companies d d
501(c)(16) Corporations
 organized to finance crop
 operations 0 0

501(c)(17) Supplemental
 unemployment benefit trusts 0 0
501(c)(18) Employee-funded
 pension trusts * 6 * 169
501(c)(19) War veterans' posts
 or organizations 437 7,157
501(c)(21) Black Lung Benefit
 Trusts [7] 0 0
501(c)(22) Withdrawal liability
 payment funds 0 0

501(c)(23) Veterans'
 associations founded
 before 1880 0 0
501(c)(24) Trusts described in
 section 4049 of ERISA 0 0
501(c)(25) Title-holding
 companies with no more than
 35 shareholders d d
501(c)(26) High-risk health
 insurance plans 0 0
501(c)(27) Workers' compensation
 reinsurance plans d d

529(a) Qualified State Tuition
 Plans d d
530(a) Coverdell Education
 Savings Accounts 0 0

Type of tax-exempt organization, Total tax [5]
 as defined by Internal Revenue
 Code section
 Number of Amount
 returns

 (9) (10)

All organizations 18,022 367,698
220(e) Archer Medical Savings
 Accounts 0 0
401(a) Qualified pension,
 profit-sharing, or stock bonus
 plans 288 25,092
408(e) Traditional Individual
 Retirement Accounts 4,093 8,802
408(A) Roth Individual
 Retirement Accounts * 31 * 920

501(c)(2) Title-holding
 corporations for exempt
 organizations [6] 79 2,102
501(c)(3) Religious,
 educational, charitable,
 scientific, or literary
 organizations 4,801 191,291
501(c)(4) Civic leagues and
 social welfare organizations 450 7,051
501(c)(5) Labor, agricultural,
 and horticultural
 organizations 776 7,768
501(c)(6) Business leagues,
 chambers of commerce, and
 real estate boards 2,260 40,854

501(c)(7) Social and
 recreational dubs 3,666 16,996
501(c)(8) Fraternal beneficiary
 societies and associations 325 1,164
501(c)(9) Voluntary employees'
 beneficiary associations 356 59,348
501(c)(10) Domestic fraternal
 beneficiary societies and
 associations 90 363
501(c)(11) Teachers' retirement
 fund associations 0 0

501(c)(12) Benevolent life
 insurance associations and
 certain mutual companies 148 2,679
501(c)(13) Cemetery companies * 37 241
501(c)(14) State-chartered
 credit unions 111 1,460
501(c)(15) Mutual insurance
 companies d d
501(c)(16) Corporations
 organized to finance crop
 operations 0 0

501(c)(17) Supplemental
 unemployment benefit trusts 0 0
501(c)(18) Employee-funded
 pension trusts * 6 * 54
501(c)(19) War veterans' posts
 or organizations 472 1,291
501(c)(21) Black Lung Benefit
 Trusts [7] 0 0
501(c)(22) Withdrawal liability
 payment funds 0 0

501(c)(23) Veterans'
 associations founded
 before 1880 0 0
501(c)(24) Trusts described in
 section 4049 of ERISA 0 0
501(c)(25) Title-holding
 companies with no more than
 35 shareholders d d
501(c)(26) High-risk health
 insurance plans 0 0
501(c)(27) Workers' compensation
 reinsurance plans d d

529(a) Qualified State Tuition
 Plans d d
530(a) Coverdell Education
 Savings Accounts 0 0

* Estimate should be used with caution because of the small number
of sample returns on which it is based.

d--Data deleted to avoid disclosure of information for specific
taxpayers. However, data are included in the appropriate totals.

[1] Excludes cost of sales and services, which was subtracted from
gross receipts from sales and services in computing gross profit
from sales and services. Gross profit from sales and services was
a component of gross unrelated business income (UBI). Cost of sales
and services can include amounts attributable to depreciation,
salaries and wages, and certain other deductible items. For all
exempt organizations reporting gross UBI, cost of sales and

[2] Includes both expenses and deductions reported on Form 990-T,
lines 13(B), 29. 31, and 33.

[3] Excludes data from 7,918 returns with equal amounts of gross
UBI and total deductions.

[4] Includes data from returns with positive amounts of unrelated
business taxable income only.

[5] Total tax is the regular unrelated business income tax after
reduction by any tax credits (foreign tax credit, general business
credit, prior-year minimum tax credit, and other allowable credits),
plus the "alternative minimum tax," the "proxy" tax to unrelated
business income or anon nondeductible lobbying and political
expenditures, and "other" taxes. The proxy tax was reported on
Form 990-T and was included in total tax, but it had no connection
the tax on organization's involvement in unrelated business
activities. For exempt organizations reporting gross UBI above the
$1,000 filing threshold, total proxy tax was $4.3 million.

[6] Corporations that are organized under an Act of Congress and
are instrumentalities of the United States, described in section
501(c)(1) of the Internal Revenue Code, are not subject to unrelated
business income taxation.

[7] Prepaid legal service funds, previously described in section
501(c)(20) of the Internal Revenue Code, were no longer tax-exempt,
beginning with tax years after June 30, 1992. Therefore, these
organizations are not listed in this table.

NOTE: Detail may not add to totals because of rounding. See the
Appendix to this article for descriptions of the types of tax-exempt
organizations filing Form 990-T, by the Internal Revenue Code section
describing them.

Table 2. Number of Returns, Gross Unrelated Business Income (UBI),
Total Deductions, Unrelated Business Taxable Income (Less Deficit),
Unrelated Business Taxable Income, and Total Tax, by Size of
Gross UBI, Tax Year 2004

[All figures are estimates based on sample--money amounts are
in thousands of dollars]

 Gross Total
Size of gross unrelated Number unrelated deductions [1,2]
business income (UBI) of business
 returns income Number
 (UBI) of
 returns Amount

 (1) (2) (3) (4)

Total 38,040 9,492,228 37,883 8,979,863
$1,000 under $10,001 [6] 13,880 57,462 13,795 62,425
$10,001 under $100,000 [6] 13,283 506,918 13,232 502,631
$100,000 under $500,000 8,173 1,757,769 8,158 1,730,337
$500,000 under $1,000,000 1,254 874,200 1,250 856,810
$1,000,000 under $5,000,000 1,150 2,356,084 1,148 2,238,709
$5,000,000 or more 300 3,939,796 300 3,588,950

 Unrelated business
 taxable income (less Unrelated business
Size of gross unrelated deficit) [3] taxable income [4]
business income (UBI)
 Number Number
 of of
 returns Amount returns Amount

 (5) (6) (7) (8)

Total 30,122 512,364 18,099 1,287,972
$1,000 under $10,001 [6] 11,359 -4,963 8,521 18,029
$10,001 under $100,000 [6] 10,418 4,287 5,239 91,964
$100,000 under $500,000 6,261 27,431 3,270 223,424
$500,000 under $1,000,000 959 17,390 522 100,930
$1,000,000 under $5,000,000 887 117,374 426 319,984
$5,000,000 or more 238 350,845 121 533,640

 Total tax [5]
Size of gross unrelated
business income (UBI)
 Number
 of
 returns Amount

 (9) (10)

Total 18,022 367,698
$1,000 under $10,001 [6] 8,463 3,047
$10,001 under $100,000 [6] 5,189 16,593
$100,000 under $500,000 3,257 60,594
$500,000 under $1,000,000 523 30,160
$1,000,000 under $5,000,000 449 97,227
$5,000,000 or more 140 160,078

[1] Excludes cost of sales and services, which was subtracted from
gross receipts from sales and services in computing gross profit from
sales and services. Gross profit from sales and services was a
component of gross unrelated business income (UBI). Cost of sales and
services can include amounts attributable to depreciation, salaries
and wages, and certain other deductible items. For all exempt
organizations reporting gross UBI, cost of sales and services was
$2.8 billion.

[2] Includes both expenses and deductions reported on Form 990-T,
lines 13(B). 29. 31. and 33.

[3] Excludes data from 7,918 returns with equal amounts of gross
UBI and total deductions.

[4] Includes data from returns with positive amounts of unrelated
business taxable income only.

[5] Total tax is the regular unrelated business income tax after
reduction by any tax credits (foreign tax credit, general business
credit, prior-year minimum tax credit, and other allowable credits),
plus the "alternative minimum tax," the "proxy" tax on nondeductible
lobbying and political expenditures, and "other" taxes. The proxy tax
was reported on Form 990-T and was included in total tax however, it
had no connection to the tax on unrelated business income or an
organization's involvement in unrelated business activities. For
exempt organizations reporting gross UBI above the $1,000 fling
threshold, total proxy tax was $4.3 million.

[6] The gross unrelated business income (UBI) brackets of "$1,000
under $10.001" and "$10.001 under $100,000" reflect the different
filing requirements for organizations with gross UBI of $10,000 or
less (not required to report itemized expenses and deductions, or
to complete return schedules) and all other Form 990-T filers
(required to file a more detailed "complete" return). Organizations
with gross UBI below $1.000 were not required to file Form 990-T.

NOTE: Detail may not add to totals because of rounding.

Table 3. Number of Returns, Gross Unrelated Business Income (UBI),
Total Deductions, Unrelated Business Taxable Income (Less Deficit),
and Total Tax, by Size of Unrelated Business Taxable Income
or Deficit, Tax Year 2004

[All figures are estimates based on samplesmoney amounts are in
thousands of dollars]

 Gross
 Size of unrelated unrelated Total
 business taxable Number business deductions [1,2]
 income or deficit of income
 returns (UBI) Number
 of
 returns Amount

 (1) (2) (3) (4)

Total 38,040 9,492,228 37,883 8,979,863
Deficit 12,023 3,585,960 12,023 4,361,567
Zero [4] 7,918 2,184,388 7,918 2,184,388
$1 under $1,000 3,956 54,487 3,956 52,645
$1,000 under $10,000 7,623 293,164 7,538 263,739
$10,000 under $100,000 5,009 826,326 4,958 664,437
$100,000 under $500,000 1,144 777,180 1,129 542,474
$500,000 under $1,000,000 158 372,313 154 260,058
$1,000,000 or more 209 1,398,410 207 650,556

 Unrelated
 Size of unrelated business taxable
 business taxable income (less deficit) Total tax [3]
 income or deficit
 Number Number
 of of
 returns Amount returns Amount

 (5) (6) (7) (8)

Total 30,122 512,364 18,022 367,698
Deficit 12,023 -775,607 69 2,639
Zero [4] 0 0 161 1,624
$1 under $1,000 3,956 1,842 3,891 273
$1,000 under $10,000 7,623 29,425 7,514 4,737
$10,000 under $100,000 5,009 161,889 4,885 29,087
$100,000 under $500,000 1,144 234,707 1,137 73,580
$500,000 under $1,000,000 158 112,255 158 36,027
$1,000,000 or more 209 747,854 207 219.731

[1] Excludes cost of sales and services, which was subtracted from
gross receipts from sales and services in computing gross profit
from sales and services. Gross profit from sales and services was
a component of gross unrelated business income (UBI). Cost of sales
and services can include amounts attributable to depreciation,
salaries and wages, and certain other deductible items. For all
exempt organizations reporting gross UBI, cost of sales and services
was $2.8 billion.

[2] Includes both expenses and deductions reported on Form 990-T,
lines 13(B), 29, 31, and 33.

[3] Total tax is the regular unrelated business income tax after
reduction by any tax credits (foreign tax credit, general business
credit, prior-year minimum tax credit, and other allowable credits),
plus the "alternative minimum tax," the "proxy" tax on nondeductible
lobbying and political expenditures, and "other" taxes. The proxy tax
was reported on Form 990-T and was included in total tax; however,
it had no connection to the tax on unrelated business income or an
organization's involvement in unrelated business activities. For
exempt organizations reporting gross UBI above the $1,000 filing
threshold, total proxy tax was $4.3 million.

[4] The Zero category includes returns with equal amounts of gross
unrelated business income and total deductions.

NOTE: Detail may not add to totals because of rounding.

Table 4. Returns with Positive Unrelated Business Taxable Income:
Number of Returns, Gross Unrelated Business Income (UBI), Total
Deductions, Unrelated Business Taxable Income, and Total
Tax, by Type of Entity and Size of Gross UBI, Tax Year 2004

[All figures are estimates based on samples-money amounts are
in thousands of dollars]

 Gross
 Type of entity and size unrelated Total
 of gross unrelated Number business deductions [1,2]
 business income (UBI) of income
 returns (UBI) Number
 of
 returns Amount

 (1) (2) (3) (4)
 ALL ENTITIES

Total 18,099 3,721,880 17,942 2,433,908
$1,000 under $10,001 [4] 8,521 31,172 8,436 13,142
$10,001 under $100,000[4] 5,239 198,915 5,189 106,950
$100,000 under $500,000 3,270 715,402 3,254 491,978
$500,000 under $1,000,000 522 356,833 518 255,903
$1,000,000 under $5,000,000 426 859,333 424 539,349
$5,000,000 or more 121 1,560,225 121 1,026,585

 TAX-EXEMPT CORPORATIONS

Total 12,938 3,067,437 12,851 2,224,323
$1,000 under $10,001141 4,413 18,558 4,356 8,491
$10,001 under $100,000 [4] 4,697 178,419 4,681 103,058
$100,000 under $500,000 2,927 639,785 2,913 475,765
$500,000 under $1,000,000 459 313,015 458 247,082
$1,000,000 under $5,000,000 340 690,847 340 497,868
$5,000,000 or more 103 1,226,813 103 892,057

 TAX-EXEMPT TRUSTS

Total 5,161 654,443 5,091 209,585
$1,000 under $10,001 [4] 4,109 12,613 4,080 4,651
$10,001 under $100,000 [4] 543 20,496 508 3,892
$100,000 under $500,000 342 75,617 341 16,212
$500,000 under $1,000,000 63 43,818 60 8,821
$1,000,000 under $5,000,000 86 168,486 84 41,481
$5,000,000 or more 18 333,413 18 134,528

 Type of entity and size Unrelated Total tax [3]
 of gross unrelated business
 business income (UBI) taxable
 income Number
 of
 returns Amount

 (5) (6) (7)
 ALL ENTITIES

Total 1,287,972 17,792 363,436
$1,000 under $10,001 [4] 18,029 8,407 2,991
$10,001 under $100,000[4] 91,964 5,145 16,263
$100,000 under $500,000 223,424 3,190 60,282
$500,000 under $1,000,000 100,930 509 30,083
$1,000,000 under $5,000,000 319,984 422 96,742
$5,000,000 or more 533,640 119 157,074

 TAX-EXEMPT CORPORATIONS

Total 843,114 12,739 254,197
$1,000 under $10,001141 10,067 4,355 1,518
$10,001 under $100,000 [4] 75,361 4,643 11,961
$100,000 under $500,000 164,020 2,855 42,931
$500,000 under $1,000,000 65,932 446 19,942
$1,000,000 under $5,000,000 192,978 336 63,993
$5,000,000 or more 334,755 103 113,852

 TAX-EXEMPT TRUSTS

Total 444,858 5,053 109,239
$1,000 under $10,001 [4] 7,962 4,052 1,474
$10,001 under $100,000 [4] 16,604 502 4,302
$100,000 under $500,000 59,404 335 17,350
$500,000 under $1,000,000 34,998 63 10,141
$1,000,000 under $5,000,000 127,005 86 32,749
$5,000,000 or more 198,885 16 43,223

[1] Excludes cost of sales and services, which was subtracted from
gross receipts from sales and services in computing gross profit from
sales and services. Gross profit from sales and services was a
component of gross unrelated business income (UBI). Cost of sales
and services can include amounts attributable to depreciation,
salaries and wages, and certain other deductible items. For exempt
organizations reporting positive unrelated business taxable income,
cost of sales and services was $847.2 million, 71 percent of which
was attributable to tax-exempt corporations.

[2] Induces both expenses and deductions reported on Form 990-T.
lines 13(8), 29, 31, and 33.

[3] Total tax is the regular unrelated business income tax after
reduction by any tax credits (foreign tax credit. general business
credit, prior-year minimum tax credit, and other allowable credits),
plus the "alternative minimum tax," the "proxy" tax on nondeductible
lobbying and political expenditures, and "other" taxes. The proxy
tax was reported on Form 990.7 and was included in total tax;
however, it had no connection to the tax on unrelated business
income or an organization's involvement in unrelated business
activities. For exempt organizations reporting positive unrelated
business taxable income, total proxy tax was $3.6 million.

[4] The gross unrelated business income (UBI) brackets of "$1,000
under $10,001" and "$10,001 under $100,000" reflect the different
filing requirements for organizations with gross UBI of $10,000 or
less (not required to report itemized expenses and deductions, or
to complete return schedules) and all other Form 990-T filers
(required to file a more detailed "complete" return). Organizations
with gross UBI below $1.000 were not required to file Form 990-7.

NOTE: Detail may not add to totals because of rounding.

Table 5. Number of Returns, Gross Unrelated Business Income (UBI),
Total Deductions, Unrelated Business Taxable Income (Less Deficit),
Unrelated Business Taxable Income, and Total Tax, by Primary
Unrelated Business Activity or Industrial Grouping, Tax Year 2004

[All figures are estimates based on samples--money amounts are in
thousands of dollars]

 Gross
 Number unrelated
 Primary unrelated business of business
 activity or industrial grouping returns income
 (UBI)

 (1) (2)

All activities and groupings 38,040 9,492,228
Agriculture, forestry, hunting,
 and fishing 186 64,062
Mining 230 26,823
Utilities 62 36,349
Construction 41 133,012
Manufacturing 217 82,229
Wholesale trade 68 30,739
Retail trade 1,308 734,810
Transportation and warehousing 65 6,508
Information 753 220,833
Finance and insurance, total 10,602 1,809,948
 Unrelated debt-financed
 activities, other than rental
 of real estate [6] 964 208,745
 Investment activities of Code
 section 501(c)(7), (9),
 and (17) organizations [6,7] 3,318 664,790
 Passive income activities with
 controlled organizations [6] 391 210,050
 Other finance and insurance 5,928 726,362
Real estate and rental and
 leasing, total 6,240 1,089,062
 Rental of personal property 473 68,786
 Other real estate and rental
 and leasing 5,767 1,020,275
Professional, scientific, and
 technical services 7,985 1,913,396
Management of companies and
 enterprises 84 41,137
Administrative and support and
 waste management and
 remediation services 782 381,278
Educational services 62 44,117
Healthcare and social assistance 977 1,271,260
Arts, entertainment, and
 recreation 4,562 744,440
Accommodation and food services 2,888 616,011
Other services 614 152,414
Exploited exempt activities 250 88,564
Not allocable * 63 * 5,239

 Total
 deductions [1,2]
 Primary unrelated business
 activity or industrial grouping

 Number of
 returns Amount

 (3) (4)

All activities and groupings 37,883 8,979,863
Agriculture, forestry, hunting,
 and fishing 185 29,353
Mining 224 10,007
Utilities 60 25,824
Construction 41 129,036
Manufacturing 217 56,758
Wholesale trade 68 6,043
Retail trade 1,308 769,698
Transportation and warehousing 65 6,736
Information 752 219,937
Finance and insurance, total 10,464 1,331,246
 Unrelated debt-financed
 activities, other than rental
 of real estate [6] 935 111,217
 Investment activities of Code
 section 501(c)(7), (9),
 and (17) organizations [6,7] 3,305 426,514
 Passive income activities with
 controlled organizations [6] 389 191,205
 Other finance and insurance 5,834 602,310
Real estate and rental and
 leasing, total 6,233 981,884
 Rental of personal property 473 66,582
 Other real estate and rental
 and leasing 5,760 915,302
Professional, scientific, and
 technical services 7,985 1,905,874
Management of companies and
 enterprises 84 26,664
Administrative and support and
 waste management and
 remediation services 782 404,622
Educational services 62 44,288
Healthcare and social assistance 977 1,335,845
Arts, entertainment, and
 recreation 4,562 785,839
Accommodation and food services 2,887 664,921
Other services 614 157,919
Exploited exempt activities 250 83,919
Not allocable * 63 * 3,451

 Unrelated business
 taxable income (less
 deficit) [3]
 Primary unrelated business
 activity or industrial grouping
 Number of
 returns Amount

 (5) (6)

All activities and groupings 30,122 512,364
Agriculture, forestry, hunting,
 and fishing 116 34,709
Mining 199 16,816
Utilities 60 10,525
Construction 34 3,976
Manufacturing 175 25,471
Wholesale trade 60 24,696
Retail trade 1,109 -34,888
Transportation and warehousing * 34 * -228
Information 541 896
Finance and insurance, total 9,310 478,701
 Unrelated debt-financed
 activities, other than rental
 of real estate [6] 890 97,529
 Investment activities of Code
 section 501(c)(7), (9),
 and (17) organizations [6,7] 2,786 238,276
 Passive income activities with
 controlled organizations [6] 319 18,845
 Other finance and insurance 5,315 124,051
Real estate and rental and
 leasing, total 5,324 107,178
 Rental of personal property 420 2,205
 Other real estate and rental
 and leasing 4,904 104,973
Professional, scientific, and
 technical services 5,195 7,521
Management of companies and
 enterprises 81 14,473
Administrative and support and
 waste management and
 remediation services 631 -23,344
Educational services 47 -171
Healthcare and social assistance 778 -64,585
Arts, entertainment, and
 recreation 3,281 -41,400
Accommodation and food services 2,389 -48,910
Other services 506 -5,505
Exploited exempt activities 219 4,645
Not allocable * 35 * 1,788

 Unrelated business
 taxable income [4]
 Primary unrelated business
 activity or industrial grouping
 Number of
 returns Amount

 (7) (8)

All activities and groupings 18,099 1,287,972
Agriculture, forestry, hunting,
 and fishing 65 36,463
Mining 199 16,816
Utilities 48 11,129
Construction * 24 * 4,753
Manufacturing 151 30,151
Wholesale trade * 41 * 25,434
Retail trade 394 28,247
Transportation and warehousing d d
Information 192 24,378
Finance and insurance, total 8,142 580,579
 Unrelated debt-financed
 activities, other than rental
 of real estate [6] 794 107,894
 Investment activities of Code
 section 501(c)(7), (9),
 and (17) organizations [6,7] 2,487 258,922
 Passive income activities with
 controlled organizations [6] 246 43,371
 Other finance and insurance 4,614 170,392
Real estate and rental and
 leasing, total 2,870 198,881
 Rental of personal property 169 5,902
 Other real estate and rental
 and leasing 2,702 192,980
Professional, scientific, and
 technical services 2,423 131,362
Management of companies and
 enterprises 78 15,910
Administrative and support and
 waste management and
 remediation services 222 23,698
Educational services d d
Healthcare and social assistance 342 73,889
Arts, entertainment, and
 recreation 1,524 38,036
Accommodation and food services 918 29,544
Other services 270 4,544
Exploited exempt activities 138 7,733
Not allocable d d

 Total
 tax [5]
 Primary unrelated business
 activity or industrial grouping
 Number of
 returns Amount

 (9) (10)

All activities and groupings 18,022 367,698
Agriculture, forestry, hunting,
 and fishing 66 12,469
Mining 199 5,097
Utilities 48 3,523
Construction * 24 * 1,490
Manufacturing 152 6,642
Wholesale trade * 41 * 8,437
Retail trade 405 7,916
Transportation and warehousing d d
Information 194 7,896
Finance and insurance, total 7,988 161,042
 Unrelated debt-financed
 activities, other than rental
 of real estate [6] 792 32,963
 Investment activities of Code
 section 501(c)(7), (9),
 and (17) organizations [6,7] 2,453 63,861
 Passive income activities with
 controlled organizations [6] 250 12,555
 Other finance and insurance 4,493 51,663
Real estate and rental and
 leasing, total 2,876 53,810
 Rental of personal property 164 1,487
 Other real estate and rental
 and leasing 2,712 52,324
Professional, scientific, and
 technical services 2,503 40,915
Management of companies and
 enterprises 81 5,202
Administrative and support and
 waste management and
 remediation services 226 7,285
Educational services d d
Healthcare and social assistance 368 24,283
Arts, entertainment, and
 recreation 1,499 8,615
Accommodation and food services 912 7,738
Other services 272 1,058
Exploited exempt activities 139 2,154
Not allocable d d

* Estimate should be used with caution because of the small number
of sample returns on which it is based.

d--Data deleted to avoid disclosure of information for specific
taxpayers. However, data are included in the appropriate totals.

[1] Excludes cost of sales and services, which was subtracted from
gross receipts from sales and services in computing gross profit
from sales and services. Gross profit from sales and services was
a component of gross unrelated business income (UBI). Cost of sales
and services can include amounts attributable to depreciation,
salaries and wages. and certain other deductible items. For all
exempt organizations reporting gross UBI, cost of sales and services
was $2.8 billion.

[2] Includes both expenses and deductions reported on Form 990-T,
lines 13(8), 29, 31, and 33.

[3] Excludes data from 7.918 returns with equal amounts of gross
UBI and total deductions.

[4] Includes data from returns with positive amounts of unrelated
business taxable income only.

[5] Total tax is the regular unrelated business income tax after
reduction by any tax credits (foreign tax credit, general business
credit. prior-year minimum tax credit, and other allowable credits),
plus the "alternative minimum tax," the "proxy" tax on nondeductible
lobbying and political expenditures. and "other" taxes. The proxy
tax was reported on Form 990-T and was included in total tax;
however, it had no connection to the tax on unrelated business
income or an organization's involvement in unrelated business
activities. For exempt organizations reporting gross UBI above the
$1,000 filing threshold, total proxy tax was $4.3 million.

[6] See the Explanation of Selected Terms section of this article
for definitions of Unrelated Debt-Financed Income, Investment Income
(Less Loss). and Income from Controlled Organizations.

[7] Section 501(c)(7) organizations are social and recreational dubs,
section 501(c)(9) organizations are voluntary employees' beneficiary
associations; and section 501(c)(17) organizations are supplemental
unemployment benefit trusts.

NOTE: Detail may not add to totals because of rounding.

Table 6. Sources of Gross Unrelated Business Income (UBI),
by Size of Gross UBI, Tax Year 2004

[All figures are estimates based on samples--money amounts are
in thousands of dollars]

Size of gross unrelated business Gross unrelated business
 income (UBI) income (UBI)

 Number of
 returns Amount

 (1) (2)

Total 38,040 9,492,228
$1,000 under $10,001 [2] 13,880 57,462
$10,001 or more, total [2] 24,160 9,434,766
 $10,001 under $100,000 13,283 506,918
 $100,000 under $500,000 8,173 1,757,769
 $500,000 under $1,000,000 1,254 874,200
 $1,000,000 under $5,000,000 1,150 2,356,084
 $5,000,000 or more 300 3,939,796

 Sources of gross unrelated
 business income (UBI) [1]

 Gross profit (less loss) from
Size of gross unrelated business sales and services
 income (UBI)
 Number of
 returns Amount

 (3) (4)

Total 15,889 4,854,512
$1,000 under $10,001 [2] 2,756 9,576
$10,001 or more, total [2] 13,133 4,844,936
 $10,001 under $100,000 6,412 221,936
 $100,000 under $500,000 4,950 918,683
 $500,000 under $1,000,000 831 465,679
 $1,000,000 under $5,000,000 730 1,247,017
 $5,000,000 or more 211 1,991,621

 Sources of gross unrelated
 business income (UBI) [1]

 Capital gain net income

 Number of
 returns Amount

 (5) (6)

Total 1,642 360,046
$1,000 under $10,001 [2] 804 2,146
$10,001 or more, total [2] 838 357,900
 $10,001 under $100,000 347 7,223
 $100,000 under $500,000 289 39,770
 $500,000 under $1,000,000 64 22,247
 $1,000,000 under $5,000,000 98 93,560
 $5,000,000 or more 39 195,099

 Sources of gross unrelated
 business income (UBI) [1]

 Net capital loss
Size of gross unrelated business (trusts only)
 income (UBI)
 Number of Amount
 returns

 (7) (8)

Total 115 339
$1,000 under $10,001 [2] 0 0
$10,001 or more, total [2] 115 339
 $10,001 under $100,000 * 52 * 142
 $100,000 under $500,000 32 93
 $500,000 under $1,000,000 9 38
 $1,000,000 under $5,000,000 ** 22 ** 66
 $5,000,000 or more ** **

 Sources of gross unrelated
 business income (UBI) [1]

 Net gain (less loss), sales of
Size of gross unrelated business noncapital assets [3]
 income (UBI)
 Number of Amount
 returns

 (9) (10)

Total 311 11,980
$1,000 under $10,001 [2] * 97 * 123
$10,001 or more, total [2] 214 11,857
 $10,001 under $100,000 79 1,282
 $100,000 under $500,000 64 3,280
 $500,000 under $1,000,000 25 2,505
 $1,000,000 under $5,000,000 ** 45 ** 4,791
 $5,000,000 or more ** **

 Sources of gross unrelated
 business income (UBI) [1]

 Income (less loss) from
Size of gross unrelated business partnerships and S corporations
 income (UBI)
 Number of Amount
 returns

 (11) (12)

Total 6,239 572,093
$1,000 under $10,001 [2] 4,239 10,987
$10,001 or more, total [2] 2,000 561,107
 $10,001 under $100,000 877 22,523
 $100,000 under $500,000 638 82,942
 $500,000 under $1,000,000 157 41,445
 $1,000,000 under $5,000,000 218 152,433
 $5,000,000 or more 110 261,763

 Sources of gross unrelated
 business income (UBI) [1]

Size of gross unrelated business Rental income [4]
 income (UBI)
 Number of Amount
 returns

 (13) (14)

Total 4,313 265,970
$1,000 under $10,001 [2] 1,135 6,474
$10,001 or more, total [2] 3,178 259,497
 $10,001 under $100,000 2,078 51,295
 $100,000 under $500,000 831 80,836
 $500,000 under $1,000,000 143 38,485
 $1,000,000 under $5,000,000 92 52,485
 $5,000,000 or more 34 36,395

 Sources of gross unrelated
 business income (UBI) [1]

 Unrelated debt-
Size of gross unrelated business financed income
 income (UBI)
 Number of Amount
 returns

 (15) (16)

Total 3,120 475,467
$1,000 under $10,001 [2] 855 4,200
$10,001 or more, total [2] 2,266 471,267
 $10,001 under $100,000 1,242 37,340
 $100,000 under $500,000 744 105,481
 $500,000 under $1,000,000 110 47,857
 $1,000,000 under $5,000,000 128 120,456
 $5,000,000 or more 42 160,133

 Sources of gross unrelated
 business income (UBI) [1]

 Investment income
Size of gross unrelated business (less loss) [5]
 income (UBI)
 Number of Amount
 returns

 (17) (18)

Total 5,531 553,539
$1,000 under $10,001 [2] 2,522 6,810
$10,001 or more, total [2] 3,008 546,730
 $10,001 under $100,000 1,442 20,355
 $100,000 under $500,000 1,235 57,489
 $500,000 under $1,000,000 202 30,267
 $1,000,000 under $5,000,000 111 106,402
 $5,000,000 or more 18 332,217

 Sources of gross unrelated
 business income (UBI) [1]

 Income from controlled
Size of gross unrelated business organizations [6]
 income (UBI)
 Number of Amount
 returns

 (19) (20)

Total 1,005 217,923
$1,000 under $10,001 [2] 219 558
$10,001 or more, total [2] 786 217,365
 $10,001 under $100,000 294 7,226
 $100,000 under $500,000 324 28,364
 $500,000 under $1,000,000 54 13,144
 $1,000,000 under $5,000,000 75 45,480
 $5,000,000 or more 39 123,152

 Sources of gross unrelated
 business income (UBI) [1]

 Exploited exempt activity
Size of gross unrelated business income, except advertising
 income (UBI)
 Number of Amount
 returns

 (21) (22)

Total 895 176,462
$1,000 under $10,001 [2] 153 804
$10,001 or more, total [2] 743 175,658
 $10,001 under $100,000 286 7,162
 $100,000 under $500,000 282 29,657
 $500,000 under $1,000,000 67 20,103
 $1,000,000 under $5,000,000 86 56,387
 $5,000,000 or more 22 62,349

 Sources of gross unrelated
 business income (UBI) [1]

 Advertising
 income
Size of gross unrelated business
 income (UBI) Number of Amount
 returns

 (23) (24)

 8,207 1,417,249
Total 2,675 12,422
$1,000 under $10,001 [2] 5,531 1,404,827
$10,001 or more, total [2] 2,896 83,885
 $10,001 under $100,000 1,980 286,955
 $100,000 under $500,000 293 144,995
 $500,000 under $1,000,000 286 341,411
 $1,000,000 under $5,000,000 76 547,582
 $5,000,000 or more
 Sources of gross unrelated
 business income (UBI) [1]

 Other income
Size of gross unrelated business (less loss)
 income (UBI)
 Number of Amount
 returns

 (25) (26)

Total 5,351 587,324
$1,000 under $10,001 [2] 1,284 3,363
$10,001 or more, total [2] 4,066 583,960
 $10,001 under $100,000 1,969 46,831
 $100,000 under $500,000 1,591 124,405
 $500,000 under $1,000,000 218 47,512
 $1,000,000 under $5,000,000 223 138,250
 $5,000,000 or more 65 226,962

* Estimate should be used with caution because of the small number
of sample returns on which it is based.

** Data in adjacent size classes are combined to avoid disclosure
of information about specific taxpayers.

[1] For definitions of the sources of gross unrelated business
income, see the Explanation of Selected Terms section of this article.

[2] The gross unrelated business income (UBI) brackets of "$1,000
under $10,001" and "$10,001 under $100,000" reflect the different
filing requirements for organizations with gross UBI of $10,000 or
less (not required to report itemized expenses and deductions,
or to complete return schedules) and all other Form 990-T filers
(required to file a more detailed "complete" return). Organizations
with gross UBI below $1,000 were not required to file Form 990-T.

[3] Property other than capital assets generally included property
of a business nature, in contrast to personal property and investment
property, which were capital assets.

[4] Income from real property and personal property leased with real
property.

[5] Reported by Internal Revenue Code section 501(c)(7) social and
recreational dubs, section 501(c)(9) voluntary employees' beneficiary
associations, and section 501(c)(17) supplemental unemployment benefit
trusts only.

[6] Annuities, interest, rents, and royalties.

NOTE: Detail may not add to totals because of rounding.

Table 7. Unrelated Business Income Tax Returns: Types of Deductions
by Size of Gross Unrelated Business Income (UBI), Tax Year 2004

[All figures are estimates based on samples--money amounts are in
thousands of dollars]

 All organizations

 Total deductions [1, 2]
 Size of gross unrelated Total
 business income (UBI) number
 of returns

 Number of
 returns Amount

 (1) (2) (3)

Total 38,040 37,883 8,979,863
$1,000 under $10,001 [3] 13,880 13,795 62,425
$10,001 under $100 000 [3] 13,283 13,232 502,631
$100,000 under $500,000 8,173 8,158 1,730,337
$500,000 under $1,000,000 1,254 1,250 856,810
$1,000,000 under $5,000,000 1,150 1,148 2,238,709
$5,000,000 or more 300 300 3,588,950

 Organizations with gross unrelated
 business income (UBI) of
 $1,000 under $10,001 [3]

 Size of gross unrelated
 business income (UBI) Total deductions [2, 4]

 Number of
 returns Amount

 (4) (5)

Total 13,796 62,426
$1,000 under $10,001 [3] 13,795 62,425
$10,001 under $100 000 [3] N/A N/A
$100,000 under $500,000 N/A N/A
$500,000 under $1,000,000 N/A N/A
$1,000,000 under $5,000,000 N/A N/A
$5,000,000 or more N/A N/A

 Organizations with gross unrelated
 business income (UBI) of
 $1,000 under $10,001 [3]

 Size of gross unrelated Net operating loss
 business income (UBI) deduction

 Number of
 returns Amount

 (6) (7)

Total 931 2,263
$1,000 under $10,001 [3] 931 2,253
$10,001 under $100 000 [3] N/A N/A
$100,000 under $500,000 N/A N/A
$500,000 under $1,000,000 N/A N/A
$1,000,000 under $5,000,000 N/A N/A
$5,000,000 or more N/A N/A

 Organizations with gross unrelated
 business income (UBI) of
 $1,000 under $10,001 [3]

 Size of gross unrelated
 business income (UBI) Specific deduction

 Number of
 returns Amount

 (8) (9)

Total 9,436 8,979
$1,000 under $10,001 [3] 9,435 8,979
$10,001 under $100 000 [3] N/A N/A
$100,000 under $500,000 N/A N/A
$500,000 under $1,000,000 N/A N/A
$1,000,000 under $5,000,000 N/A N/A
$5,000,000 or more N/A N/A

 Organizations with gross unrelated
 business income (UBI) of
 $1,000 under $10,001 [3]

 Deductions directly connected
 with UBI

 Size of gross unrelated
 business income (UBI) Total deductions [2, 5]

 Number of
 returns Amount

 (10) (11)

Total 24,088 8,917,439
$1,000 under $10,001 [3] N/A N/A
$10,001 under $100,000 [3] 13,232 502,631
$100,000 under $500,000 8,158 1,730,337
$500,000 under $1,000,000 1,250 856,810
$1,000,000 under $5,000,000 1,148 2,238,709
$5,000,000 or more 300 3,588,950

 Organizations with gross unrelated
 business income (UBI) of
 $1,000 under $10,001 [3]

 Deductions directly connected
 with UBI

 Size of gross unrelated
 business income (UBI) Total

 Number of
 returns Amount

 (12) (13)

Total 22,772 8,232,867
$1,000 under $10,001 [3] N/A N/A
$10,001 under $100,000 [3] 12,294 473,760
$100,000 under $500,000 7,863 1,625,248
$500,000 under $1,000,000 1,211 800,957
$1,000,000 under $5,000,000 1,115 2,096,326
$5,000,000 or more 288 3,236,564

 Organizations with gross unrelated
 business income (UBI) of
 $1,000 under $10,001 [3]

 Deductions directly connected
 with UBI

 Size of gross unrelated Allocable to rental
 business income (UBI) income [6]

 Number of
 returns Amount

 (14) (15)

Total 1,682 166,436
$1,000 under $10,001 [3] N/A N/A
$10,001 under $100,000 [3] 976 27,053
$100,000 under $500,000 443 53,428
$500,000 under $1,000,000 75 24,933
$1,000,000 under $5,000,000 63 35,842
$5,000,000 or more 25 24,178

 Organizations with gross unrelated
 business income (UBI) of
 $1,000 under $10,001 [3]

 Deductions directly connected
 with UBI

 Size of gross unrelated Allocable to unrelated debt-
 business income (UBI) financed income [6]

 Number of
 returns Amount

 (16) (17)

Total 2,174 466,902
$1,000 under $10,001 [3] N/A N/A
$10,001 under $100,000 [3] 1,194 40,469
$100,000 under $500,000 714 107,623
$500,000 under $1,000,000 106 46,546
$1,000,000 under $5,000,000 122 127,725
$5,000,000 or more 38 134,539
 Organizations with gross unrelated
 business income (UBI) of
 $1,000 under $10,001 [3]

 Deductions directly connected
 with UBI

 Allocable to
 Size of gross unrelated investment
 business income (UBI) income [6,7]

 Number of
 returns Amount

 (18) (19)

Total 1,097 94,449
$1,000 under $10,001 [3] N/A N/A
$10,001 under $100,000 [3] 376 4,585
$100,000 under $500,000 534 5,404
$500,000 under $1,000,000 115 1,808
$1,000,000 under $5,000,000 66 6,339
$5,000,000 or more 5 76,313

 Organizations with gross unrelated
 business income (UBI) of
 $1,000 under $10,001 [3]

 Deductions directly connected
 with UBI

 Allocable to income from
 Size of gross unrelated controlled organizations [6]
 business income (UBI)

 Number of
 returns Amount

 (20) (21)

Total 518 163,638
$1,000 under $10,001 [3] N/A N/A
$10,001 under $100,000 [3] 221 6,719
$100,000 under $500,000 181 15,879
$500,000 under $1,000,000 39 8,942
$1,000,000 under $5,000,000 49 27,742
$5,000,000 or more 29 104,256

 Organizations with gross unrelated
 business income (UBI) of
 $1,000 under $10,001 [3]

 Deductions directly connected
 with UBI

 Allocable to exploited
 Size of gross unrelated exempt activity income
 business income (UBI) except advertising [6]

 Number of
 returns Amount

 (22) (23)

Total 685 159,345
$1,000 under $10,001 [3] N/A N/A
$10,001 under $100,000 [3] 277 6,328
$100,000 under $500,000 247 24,483
$500,000 under $1,000,000 60 18,180
$1,000,000 under $5,000,000 81 52,182
$5,000,000 or more 20 58,171

 Organizations with gross unrelated
 business income (UBI) of
 $1,000 under $10,001 [3]

 Deductions directly connected
 with UBI

 Direct advertising
 Size of gross unrelated costs [6]
 business income (UBI)

 Number of
 returns Amount

 (24) (25)

Total 5,149 987,739
$1,000 under $10,001 [3] N/A N/A
$10,001 under $100,000 [3] 2,739 64,731
$100,000 under $500,000 1,794 204,284
$500,000 under $1,000,000 275 103,624
$1,000,000 under $5,000,000 272 241,637
$5,000,000 or more 69 373,463

 Organizations with gross unrelated
 business income (UBI) of
 $1,000 under $10,001 [3]

 Deductions directly connected
 with UBI

 Compensation of officers,
 Size of gross unrelated directors, and trustees
 business income (UBI)

 Number of
 returns Amount

 (26) (27)

Total 1,980 68,940
$1,000 under $10,001 [3] N/A N/A
$10,001 under $100,000 [3] 849 7,258
$100,000 under $500,000 861 21,443
$500,000 under $1,000,000 115 5,856
$1,000,000 under $5,000,000 117 10,176
$5,000,000 or more 38 14,207

 Organizations with gross unrelated
 business income (UBI) of
 $1,000 under $10,001 [3]

 Deductions directly connected
 with UBI

 Size of gross unrelated Salaries and wages
 business income (UBI)
 Number of
 returns Amount

 (28) (29)

Total 10,807 1,669,266
$1,000 under $10,001 [3] N/A N/A
$10,001 under $100,000 [3] 4,720 94,953
$100,000 under $500,000 4,528 419,821
$500,000 under $1,000,000 723 189,973
$1,000,000 under $5,000,000 658 443,651
$5,000,000 or more 179 510,857

 Organizations with gross unrelated
 business income (UBI) of
 $1,000 under $10,001 [3]

 Deductions directly connected
 with UBI

 Size of gross unrelated Repairs and maintenance
 business income (UBI)
 Number of
 returns Amount

 (30) (31)

Total 7,926 119,687
$1,000 under $10,001 [3] N/A N/A
$10,001 under $100,000 [3] 3,609 12,089
$100,000 under $500,000 3,256 37,962
$500,000 under $1,000,000 504 16,420
$1,000,000 under $5,000,000 434 22,761
$5,000,000 or more 123 30,455

 Organizations with gross unrelated
 business income (UBI) of
 $1,000 under $10,001 [3]

 Deductions directly connected
 with UBI

 Size of gross unrelated Bad debts
 business income (UBI)
 Number of
 returns Amount

 (32) (33)

Total 940 46,660
$1,000 under $10,001 [3] N/A N/A
$10,001 under $100,000 [3] 184 591
$100,000 under $500,000 437 3,535
$500,000 under $1,000,000 117 1,656
$1,000,000 under $5,000,000 141 13,377
$5,000,000 or more 61 27,500

 Organizations with gross unrelated
 business income (UBI) of
 $1,000 under $10,001 [3]

 Deductions directly connected
 with UBI

 Size of gross unrelated Interest
 business income (UBI)
 Number of
 returns Amount

 (34) (35)

Total 3,225 68,169
$1,000 under $10,001 [3] N/A N/A
$10,001 under $100,000 [3] 1,291 7,512
$100,000 under $500,000 1,460 19,056
$500,000 under $1,000,000 240 6,941
$1,000,000 under $5,000,000 168 14,467
$5,000,000 or more 66 18,193

 Organizations with gross unrelated
 business income (UBI) of
 $1,000 under $10,001 [3]

 Deductions directly connected
 with UBI

 Size of gross unrelated Taxes and licenses paid
 business income (UBI) deduction

 Number of
 returns Amount
 (36) (37)

Total 11,475 208,875
$1,000 under $10,001 [3] N/A N/A
$10,001 under $100,000 [3] 5,639 21
$100,000 under $500,000 4,513 82,969
$500,000 under $1,000,000 632 29,781
$1,000,000 under $5,000,000 537 37
$5,000,000 or more 154 38

 Organizations with gross unrelated
 business income (UBI) of
 $1,000 under $10,001 [3]

 Deductions directly connected
 with UBI
 Size of gross unrelated
 business income (UBI) Depreciation

 Number of
 returns Amount
 (38) (39)

Total 8,197 248,450
$1,000 under $10,001 [3] N/A N/A
$10,001 under $100,000 [3] 3,697 19,489
$100,000 under $500,000 3,345 71
$500,000 under $1,000,000 516 33,201
$1,000,000 under $5,000,000 487 55,930
$5,000,000 or more 153 68,848

 Organizations with gross unrelated
 business income (UBI) of
 $1,000 under $10,001 [3]

 Deductions directly connected
 with UBI

 Size of gross unrelated
 business income (UBI) Depletion

 Number of
 returns Amount
 (40) (41)

Total 132 3,468
$1,000 under $10,001 [3] N/A N/A
$10,001 under $100,000 [3] * 96 * 602
$100,000 under $500,000 * 27 * 831
$500,000 under $1,000,000 * 4 * 288
$1,000,000 under $5,000,000 ** 5 ** 1,747
$5,000,000 or more ** **

 Organizations with gross unrelated
 business income (UBI) of
 $1,000 under $10,001 [3]

 Deductions directly connected
 with UBI

 Size of gross unrelated Contributions to deferred
 business income (UBI) compensation plans

 Number of
 returns Amount
 (42) (43)

Total 1,193 13,573
$1,000 under $10,001 [3] N/A N/A
$10,001 under $100,000 [3] 420 416
$100,000 under $500,000 533 2,766
$500,000 under $1,000,000 126 1,708
$1,000,000 under $5,000,000 ** 114 ** 8,683
$5,000,000 or more ** **

 Organizations with gross unrelated
 business income (UBI) of
 $1,000 under $10,001 [3]

 Deductions directly connected
 with UBI

 Contributions to employee
 Size of gross unrelated benefit programs
 business income (UBI)
 Number of
 returns Amount

 (44) (45)

Total 5,609 239,713
$1,000 under $10,001 [3] N/A N/A
$10,001 under $100,000 [3] 1,920 7
$100,000 under $500,000 2,552 39,619
$500,000 under $1,000,000 490 23
$1,000,000 under $5,000,000 495 71,317
$5,000,000 or more 152 99,314

 Organizations with gross unrelated
 business income (UBI) of
 $1,000 under $10,001 [3]

 Deductions directly connected
 with UBI

 Size of gross unrelated Net operating loss deduction
 business income (UBI)
 Number of
 returns Amount

 (46) (47)

Total 3,699 309,400
$1,000 under $10,001 [3] N/A N/A
$10,001 under $100,000 [3] 1,693 14
$100,000 under $500,000 1,443 54,591
$500,000 under $1,000,000 231 28,968
$1,000,000 under $5,000,000 260 95
$5,000,000 or more 72 116,289

 Organizations with gross unrelated
 business income (UBI) of
 $1,000 under $10,001 [3]

 Deductions directly connected
 with UBI

 Size of gross unrelated Other deductions
 business income (UBI)
 Number of
 returns Amount

 (48) (49)

Total 14,883 3,229,269
$1,000 under $10,001 [3] NIA N/A
$10,001 under $100,000 [3] 7,282 138,557
$100,000 under $500,000 5,593 460,572
$500,000 under $1,000,000 908 257,598
$1,000,000 under $5,000,000 855 836,009
$5,000,000 or more 245 1,536,522

 Organizations with gross unrelated
 business income (UBI) of
 $1,000 under $10,001 [3]

 Deductions not directly
 Size of gross unrelated connected with UBI, total
 business income (UBI)
 Number of
 returns Amount

 (50) (51)

Total 12,651 684,581
$1,000 under $10,001 [3] N/A N/A
$10,001 under $100,000 [3] 6,783 28,871
$100,000 under $500,000 4,421 105,089
$500,000 under $1,000,000 694 55,854
$1,000,000 under $5,000,000 578 142,381
$5,000,000 or more 175 352,387

 Organizations with gross unrelated
 business income (UBI) of
 $1,000 under $10,001 [3]

 Deductions directly connected
 with UBI
 Size of gross unrelated
 business income (UBI) Specific deduction

 Number of
 returns Amount

 (52) (53)

Total 10,322 9,893
$1,000 under $10,001 [3] N/A N/A
$10,001 under $100,000 [3] 5,751 5,475
$100,000 under $500,000 3,489 3,353
$500,000 under $1,000,000 538 526
$1,000,000 under $5,000,000 422 417
$5,000,000 or more 122 122

 Organizations with gross unrelated
 business income (UBI) of
 $1,000 under $10,001 [3]

 Deductions directly connected
 with UBI
 Size of gross unrelated
 business income (UBI) Charitable contributions

 Number of
 returns Amount

 (54) (55)

Total 2,178 61,208
$1,000 under $10,001 [3] N/A N/A
$10,001 under $100,000 [3] 1,012 3,212
$100,000 under $500,000 833 11,307
$500,000 under $1,000,000 136 5,014
$1,000,000 under $5,000,000 129 10,634
$5,000,000 or more 69 31

 Organizations with gross unrelated
 business income (UBI) of
 $1,000 under $10,001 [3]

 Deductions directly connected
 with UBI

 Size of gross unrelated
 business income (UBI) Set-asides [7]

 Number of
 returns Amount

 (56) (57)

Total 326 288,520
$1,000 under $10,001 [3] N/A N/A
$10,001 under $100,000 [3] * 126 * 2,701
$100,000 under $500,000 131 23,173
$500,000 under $1,000,000 26 14
$1,000,000 under $5,000,000 34 48,006
$5,000,000 or more 9 200,564

 Organizations with gross unrelated
 business income (UBI) of
 $1,000 under $10,001 [3]

 Deductions directly connected
 with UBI

 Size of gross unrelated Excess exempt-activity
 business income (UBI) expenses [8]

 Number of
 returns Amount

 (58) (59)

Total 2,557 324,960
$1,000 under $10,001 [3] N/A N/A
$10,001 under $100,000 [3] 1,178 17,483
$100,000 under $500,000 969 67,255
$500,000 under $1,000,000 170 36,239
$1,000,000 under $5,000,000 187 83,324
$5,000,000 or more 53 120,659

* Estimate should be used with caution because of the small number
of sample returns on which it is based.

** Data in adjacent size classes are combined to avoid disclosure of
information about specific taxpayers.

N/A--Not applicable.

[1] Excludes cost of sales and services, which was subtracted from
gross receipts from sales and services in computing gross profit from
sales and services. Gross profit from sales and services was a
component of gross unrelated business income (UBI). Cost of sales and
services can include amounts attributable to depreciation, salaries
and wages, and certain other deductible items. For all exempt
organizations reporting gross UBI, cost of sales and services was
$2.8 billion.

[2] Includes both expenses and deductions reported on Form 990-T,
lines 13(8), 29, 31, and 33.

[3] Organizations with gross UBI between $1,000 (the filing threshold)
and $10,000 were required to report only totals for expenses and
deductions (except for the specific deduction and net operating
loss deduction, which all organizations reported separately).
Organizations with gross UBI over $10,000 were required to report
each expense and deduction item separately, as shown in columns 14
through 45, 48, 49, and 54 through 59.

[4] Excludes $36.2 million of cost of sales and services reported
by organizations with gross UBI of $10.000 or less. See footnote 1
for explanation.

[5] Excludes $2.7 billion of cost of sales and services reported
by organizations with gross UBI over $10,000. See footnote 1 for
explanation.

[6] This deduction was required to be reported as a lump-sum total
only and may have induced component deductions that were of the same
type shown elsewhere in this table. For example, if deductions
"allocable to rental income" included depreciation, then that
amount of depreciation would not be included in the separately
reported item, "depreciation." Therefore, the total amount shown
for some of the separately reported deductions may be understated.

[7] Reported by Internal Revenue Code section 501(c)(7) social and
recreational dubs, section 501(c)(9) voluntary employees' beneficiary
associations, and section 501(c)(17) supplemental unemployment
benefit trusts only.

[8] Includes excess exempt-activity expenses from Form 990-T.
Schedule I, and excess readership costs from Form 990-T. Schedule J.

NOTE. Detail may not add to totals because of rounding.

Figure A
Selected Items from Forms 990-T, Exempt
Organization Business Income Tax Returns,
Tax Years 2003 and 2004

[Money amounts are in thousands of dollars]

 Item 2003 2004 Percentage
 change

 (1) (2) (3)

Number of returns, total 36,064 38,040 5.5

 With gross unrelated business
 income of $10,000 or less [1] 12,681 13,880 9.5

 With gross unrelated business
 income over $10,000 [1] 23,383 24,160 3.3

 With unrelated business
 taxable income 15,580 18,099 16.2

 Without unrelated business
 taxable income [2] 20,484 19,941 -2.7

Gross unrelated business income 8,436,027 9,492,228 12.5

Total deductions [3] 8,412,822 8,979,863 6.7

Unrelated business taxable
income (less deficit) 23,204 512,364 2,108.1

 Unrelated business taxable
 income 780,149 1,287,972 65.1

 Deficit 756,944 775,607 2.5

Unrelated business income tax 219,949 364,615 65.8

Total tax 220,916 367,698 66.4

[1] Organizations with gross unrelated business income (UBI) between
$1,000 (the filing threshold) and $10,000 were not required to report
itemized expenses and deductions, or to complete return schedules.
Those with gross UBI over $10,000 were required to fill out a more
detailed "complete" return.

[2] Includes returns with deficits and returns with equal amounts of
gross unrelated business income and total deductions.

[3] Includes both expenses and deductions reported on Form 990-T,
lines 13(B), 29, 31, and 33. Excludes cost of sales and services,
which was subtracted from gross receipts from sales and services
in computing gross profit from sales and services (GPSS).

GPSS is a component of gross unrelated business income (upon which
the filing requirement is based). Total cost of sales and services
was $2.5 billion for 2003 and $2.8 billion for 2004.

NOTES: Detail may not add to totals because of rounding. See the
Explanation of Selected Terms section of this article for definitions
of gross unrelated business income, total deductions, unrelated
business taxable income (less deficit), unrelated business income
tax, and total tax.

Figure B
Selected Unrelated Business Income Tax Data for Tax-Exempt Corporate
and Trust Entities, Tax Years 1998-2004

[Money amounts are in thousands of dollars]

 Gross Total
 Type of organization, Number of unrelated investment
 tax year returns business income [1]
 income (UBI)

 (1) (2) (3)

 All organizations

1998 46,208 7,584,915 2,329,669
1999 42,151 7,722,135 2,178,006
2000 38,567 8,413,385 2,063,897
2001 35,540 7,900,464 1,291,383
2002 35,103 7,776,017 1,074,725
2003 36,064 8,436,027 1,499,461
2004 38,040 9,492,228 1,961,146

Tax-exempt corporations

1998 31,376 6,202,258 1,006,564
1999 31,567 6,260,902 768,062
2000 31,245 7,219,027 940,870
2001 31,697 7,202,952 689,406
2002 31,282 7,276,187 661,777
2003 31,802 7,579,444 724,255
2004 32,191 8,489,586 1,061,041

 Tax-exempt trusts

1998 14,831 1,382,656 1,323,105
1999 10,584 1,461,233 1,409,944
2000 7,322 1,194,357 1,123,027
2001 3,843 697,512 601,977
2002 3,821 499,830 412,948
2003 4,262 856,584 775,206
2004 5,850 1,002,642 900,105

 Unrelated Unrelated
 business business
 Type of organization, Total taxable taxable
 tax year deductions [2] income (less income
 deficit) (UBTI)

 (4) (5) (6)

 All organizations

1998 6,484,443 1,100,470 1,669,753
1999 6,834,850 887,284 1,484,921
2000 7,703,052 710,333 1,427,441
2001 7,882,907 17,557 791,963
2002 7,922,208 -146,191 647,246
2003 8,412,822 23,204 780,149
2004 8,979,863 512,364 1,287,972

Tax-exempt corporations

1998 5,896,558 305,699 858,720
1999 6,200,866 60,035 633,330
2000 7,203,007 16,021 714,035
2001 7,486,872 -283,920 469,167
2002 7,602,148 -325,961 454,613
2003 7,763,313 -183,869 544,050
2004 8,393,253 96,333 843,114

 Tax-exempt trusts

1998 587,885 794,771 811,033
1999 633,984 827,249 851,591
2000 500,045 694,312 713,407
2001 396,035 301,477 322,796
2002 320,060 179,770 192,633
2003 649,510 207,074 236,099
2004 586,610 416,031 444,858

 Unrelated
 Type of organization, Deficit business Total tax
 tax year income tax
 CUBIT)

 (7) (8) (9)

 All organizations

1998 569,283 505,896 464,288
1999 597,637 423,065 421,746
2000 717,109 405,826 402,904
2001 774,406 226,032 221,532
2002 793,438 194,074 192,747
2003 756,944 219,949 220,916
2004 775,607 364,615 367,698

Tax-exempt corporations

1998 553,021 261,970 223,351
1999 573,295 180,371 182,554
2000 698,014 208,417 208,363
2001 753,087 128,571 128,513
2002 780,574 126,652 126,074
2003 727,919 154,725 156,238
2004 746,781 252,947 255,772

 Tax-exempt trusts

1998 16,262 243,926 240,937
1999 24,342 242,695 239,192
2000 19,095 197,409 194,541
2001 21,319 97,461 93,019
2002 12,863 67,422 66,673
2003 29,025 65,223 64,678
2004 28,827 111,668 111,926

[1] Total investment income includes captial gain net income,
combined partnership and S corporation income, unrelated debt-financed
income, and investment income of Internal Revenue Code section
501(c)(7), (9), and (17) organizations. Other types of exempt
organizations' investment income ordinarily is not taxed, unless the
investment was purchased with borrowed funds; i.e., debt-financed.

[2] Includes both expenses and deductions reported on Form 990-T,
lines 13(8), 29, 31, and 33. Excludes cost of sales and services,
which was subtracted from gross receipts from sales and services
in computing gross profit from sales and services (GPSS). GPSS is a
component of gross unrelated business income (upon which the fling
requirement is based).

NOTE: Column detail may not add to totals because of rounding.

Figure C
Selected Sources of Gross Unrelated Business Income (UBI), by
Selected Types of Organizations Tax-Exempt under the
Internal Revenue Code, Tax Year 2004

[Money amounts are in thousands of dollars]

Item All
 organizations

 (1)

Number of returns 38,040
Total gross unrelated business
 income (UBI) 9,492,228
 Gross profit (less loss)
 from sales and services 4,854,512
 Capital gain net income 360,046
 Income (less loss) from partner-
 ships and S corporations 572,093
 Unrelated debt-financed income 475,467
 Investment income (less loss)
 of IRC section 501(c)(7), (9),
 and (17) orgaizations 553,539
 Exploited exempt activity
 income, except advertising 176,462
 Advertising income 1,417,249
Unrelated business taxable income
 (UBTI) 1,287,972
UBTI-to-GUBI Ratio [1] 13.6

 Organization tax-exempt under
 Internal Revenue Code section:
Item
 401 (a) 408(e) 501(c)(3)

 (2) (3) (4)

Number of returns 339 4,272 12,395
Total gross unrelated business
 income (UBI) 167,160 45,507 5,500,597
 Gross profit (less loss)
 from sales and services 6,798 3,485 3,444,917
 Capital gain net income 58,395 10,993 151,204
 Income (less loss) from partner-
 ships and S corporations 75,363 25,985 442,371
 Unrelated debt-financed income 5,441 2,028 336,531
 Investment income (less loss)
 of IRC section 501(c)(7), (9),
 and (17) orgaizations N/A N/A N/A
 Exploited exempt activity
 income, except advertising 0 0 82,949
 Advertising income 0 0 603,677
Unrelated business taxable income
 (UBTI) 89,726 34,013 636,103
UBTI-to-GUBI Ratio [1] 53.7 74.7 11.6

 Organization tax-exempt under
 Internal Revenue Code section:
Item
 501(c)(4) 501(c)(5) 501(c)(6)

 (5) (6) (7)

Number of returns 1,712 2,418 6,230
Total gross unrelated business
 income (UBI) 625,307 300,659 1,074,449
 Gross profit (less loss)
 from sales and services 297,883 128,808 218,161
 Capital gain net income 0 822 2,798
 Income (less loss) from partner-
 ships and S corporations 5,627 2,543 8,490
 Unrelated debt-financed income 6,924 26,560 35,703
 Investment income (less loss)
 of IRC section 501(c)(7), (9),
 and (17) orgaizations N/A N/A N/A
 Exploited exempt activity
 income, except advertising 5,960 6,161 76,872
 Advertising income 141,303 56,989 576,008
Unrelated business taxable income
 (UBTI) 20,620 28,212 129,657
UBTI-to-GUBI Ratio [1] 3.3 9.4 12.1

 Organization tax-exempt under
 Internal Revenue Code section:
Item
 501(c)(7) 501(c)(9) 501(c)(19)

 (8) (9) (10)

Number of returns 6,215 766 1,608
Total gross unrelated business
 income (UBI) 614,775 632,103 156,286
 Gross profit (less loss)
 from sales and services 459,087 5,749 112,064
 Capital gain net income 13,104 115,333 1,257
 Income (less loss) from partner-
 ships and S corporations d 3,435 0
 Unrelated debt-financed income N/A N/A 6,663
 Investment income (less loss)
 of IRC section 501(c)(7), (9),
 and (17) orgaizations 56,717 496,823 N/A
 Exploited exempt activity
 income, except advertising N/A N/A 1,705
 Advertising income N/A N/A 20,407
Unrelated business taxable income
 (UBTI) 71,233 237,332 7,157
UBTI-to-GUBI Ratio [1] 11.6 37.5 4.6

d--Data deleted to avoid disclosure of information for specific
taxpayers. However, data are included in the appropriate totals.

N/A-Not applicable.

[1] Ratio of unrelated business taxable income to gross unrelated
business income.

NOTE: Column detail may not add to totals because of rounding. See
the Appendix to this article for descriptions of the types of tax-
exempt organizations filing Form 990-T, by the Internal Revenue Code
section describing them.

Figure D
Sources of Gross Unrelated Business Income
(UBI), Tax Years 2003-2004
[Money amounts are in thousands of dollars]

 Tax year Tax year Percentage
 Item 2003 2004 change

 (1) (2) (3)

Number of returns 36,064 38,040 5.5
Total gross unrelated business
 income (UBI) 8,436,027 9,492,228 12.5
 Gross profit (less loss)
 from sales and services 4,501,523 4,854,512 7.8
 Capital gain net income 148,657 360,046 142.2
 Net capital loss
 (trusts only) 612 339 -44.6
 Net gain (less loss),
 noncapital assets [1] 13,073 11,980 -8.4
 Income (less loss) from
 partnerships and S
 corporations 301,520 572,093 89.7
 Rental income [2] 274,300 265,970 -3.0
 Unrelated debt-financed
 income 407,164 475,467 16.8
 Investment income
 (less loss) [3] 642,120 553,539 -13.8
 Income from controlled
 organizations [4] 206,355 217,923 5.6
 Exploited exempt activity
 income, except advertising 151,591 176,462 16.4
 Advertising income 1,280,994 1,417,249 10.6
 Other income (less loss) 509,342 587,324 15.3

[1] Property other than capital assets generally included property of
a business nature, in contrast to personal and investment property
which were capital assets.

[2] Income from real property and personal property leased with real
property.

[3] Reported by Internal Revenue Code section 501(c)(7), (9), and (17)
organizations only.

[4] Annuities, interest, rents, and royalties.

NOTE: Column detail may not add to totals because of rounding. For
explanations of each income source, see the Explanations of Selected
Terms section of this article.

Figure E
Selected Items for Nonprofit Charitable Organizations
Classified by NTEE Category, Tax Year 2004
[Money amounts are in thousands of dollars)

 All nonprofit charitable
 organizations
 NTEE major
 category (1] Number of Total
 returns revenue

 (1) (2)

Total 276,199 1,152,989,149
 Arts, culture, and humanities 28,615 25,515,073
 Education 48,920 220,139,219
 Environment, animals 11,576 11,134,496
 Health 36,372 655,062,871
 Human services 104,837 157,653,242
 International, foreign affairs 3,486 17,077,324
 Mutual, membership benefit 674 2,849,553
 Public, societal benefit 24,148 55,169,990
 Religion-related 17,416 8,376,063
 Unknown/unclassified 156 11,317

 Nonprofit charitable
 organizations with
 gross unrelated
 business income
 NTEE major
 category (1] Number of Total
 returns revenue

 (3) (4)

Total 9,501 545,225,473
 Arts, culture, and humanities 1,197 9,120,379
 Education 1,319 121,471,445
 Environment, animals 596 4,294,098
 Health 2,475 368,054,814
 Human services 2,611 18,907,536
 International, foreign affairs 49 4,003,467
 Mutual, membership benefit 11 305,309
 Public, societal benefit 811 17,240,869
 Religion-related 431 1,827,557
 Unknown/unclassified 0 0

 Nonprofit charitable organizations
 with gross unrelated business income

 Gross unrelated business income
 NTEE major
 category (1] As a As a
 Amount percentage percentage
 of Col. (2) of Col. (4)
 (5) (6) (7)

Total 4,440,965 0.4 0.8
 Arts, culture, and humanities 314,706 1.2 3.5
 Education 615,999 0.3 0.5
 Environment, animals 117,146 1.1 2.7
 Health 2,481,888 0.4 0.7
 Human services 397,960 0.3 2.1
 International, foreign affairs 13,989 0.1 0.3
 Mutual, membership benefit 14,861 0.5 4.9
 Public, societal benefit 372,626 0.7 2.2
 Religion-related 111,789 1.3 6.1
 Unknown/unclassified 0 N/A N/A

 NTEE major Unrelated
 category (1] business Total
 taxable tax
 income [2]
 (8) (9)

Total 309,291 94,083
 Arts, culture, and humanities 19,894 5,850
 Education 61,831 20,242
 Environment, animals 2,535 577
 Health 140,723 45,476
 Human services 41,893 11,200
 International, foreign affairs 4,066 1,269
 Mutual, membership benefit 18 5
 Public, societal benefit 34,420 8,508
 Religion-related 3,911 958
 Unknown/unclassified 0 0

N/A--Not applicable.

[1] The National Taxonomy of Exempt Entities (NTEE) is a classification
system that uses 26 major field areas that are aggregated into the
categories shown above. It was developed by the National Center for
Charitable Statistics. The codes describe the purposes and activities
of the organizations.

[2] Includes data from returns with positive amounts of unrelated
business taxable income only.

NOTES: Data are from linked Forms 990, 990-EZ, and 990-T for non-
profit charitable organizations that are tax-exempt under Internal
Revenue Code section 501(c)(3) and exclude private foundations, most
organizations with receipts less than $25,000, most colleges and
universities operated by State and local governments, as well as most
churches, and certain other types of religious organizations. Detail
may not add to totals because of rounding.

Figure F
Population and Sample Counts, and Designed and
Achieved Sample Rates, by Sample Group, Tax Year 2004

Sample Population Sample
group Sample group [1] count count
number

 (1) (2)

1 Gross unrelated business income
 (UBI) $1,000 under $20,000 and
 total assets under $1,000,000, or
 Gross UBI $1,000 under $20,000 and
 no matching IRC section 501(c)(3)
 Form 990 or Form 990-EZ 16,382 578

2 Gross UBI $1,000 under $20,000 and
 total assets $1,000,000 under
 $2,500,000, or
 Gross UBI $20,000 under $60,000 and
 total assets under $2,500,000, or
 Gross UBI $20,000 under $60,000 and
 no matching Form 990 or Form
 990-EZ 7,187 411

3 Gross UBI $1,000 under $60,000 and
 total assets $2,500,000 under
 $20,000,000, or
 Gross UBI $60,000 under $250,000
 and total assets under
 $20,000,000, or
 Gross UBI $60,000 under $250,000
 and no matching Form 990 or
 Form 990-EZ 8,355 1,346

4 Gross UBI $1,000 under $250,000 and
 total assets $20,000,000 under
 $50,000,000, or
 Gross UBI $250,000 under $500,000
 and total assets under
 $50,000,000, or
 Gross UBI $250,000 under $500,000
 and no matching Form 990 or Form
 990-EZ 2,425 1,669

5 Gross UBI $500,000 or more, or
 total assets $50,000,000 or more 3,938 3,936
 All sample groups [2] 38,287 7,940

 Designed Achieved
Sample sample sample
group Sample group [1] rate rate
number
 Percentage

 (3) (4)

1 Gross unrelated business income
 (UBI) $1,000 under $20,000 and
 total assets under $1,000,000, or
 Gross UBI $1,000 under $20,000 and
 no matching IRC section 501(c)(3)
 Form 990 or Form 990-EZ 3.65 3.53

2 Gross UBI $1,000 under $20,000 and
 total assets $1,000,000 under
 $2,500,000, or
 Gross UBI $20,000 under $60,000 and
 total assets under $2,500,000, or
 Gross UBI $20,000 under $60,000 and
 no matching Form 990 or Form
 990-EZ 5.11 5.72

3 Gross UBI $1,000 under $60,000 and
 total assets $2,500,000 under
 $20,000,000, or
 Gross UBI $60,000 under $250,000
 and total assets under
 $20,000,000, or
 Gross UBI $60,000 under $250,000
 and no matching Form 990 or
 Form 990-EZ 10.42 16.11

4 Gross UBI $1,000 under $250,000 and
 total assets $20,000,000 under
 $50,000,000, or
 Gross UBI $250,000 under $500,000
 and total assets under
 $50,000,000, or
 Gross UBI $250,000 under $500,000
 and no matching Form 990 or Form
 990-EZ 78.59 68.82

5 Gross UBI $500,000 or more, or
 total assets $50,000,000 or more 100.00 99.95
 All sample groups [2] N/A 20.74

N/A-Not applicable.

[1] The Form 990-T sample included returns that were initially
selected based on independent Form 990-T sampling criteria,
and additional returns that were not initially selected but were
subsequently matched to information returns in the Forms 990 and
990-EZ sample of IRC section 501(c)(3) filers. Gross unrelated
business income is obtained from Form 990-T and total assets are
obtained from Form 990/990EZ.

[2] After excluding returns that were originally selected for
the sample but later rejected, the sample size was 7,905, and
the estimated population size was 38,040.

Figure G
Coefficients of Variation for Selected Form 990-T
Items, by Size of Gross Unrelated Business
Income, Tax Year 2004

 Number Gross
 Size of gross unrelated of unrelated Total
 business income returns business deductions
 income

 Coefficient of variation (percentage)

 (1) (2) (3)

 Total 0.18 0.17 0.27
$1,000 under $10,001 [1] 2.03 3.40 15.34
$10,001 under $100,000 [1] 2.20 1.88 2.60
$100,000 under $500,000 1.23 1.01 1.23
$500,000 or more N/A N/A N/A

 Unrelated
 Size of gross unrelated business Total
 business income taxable tax
 income

 Coefficient of variation (percentage)

 (4) (5)

 Total 0.75 0.81
$1,000 under $10,001 [1] 6.74 7.52
$10,001 under $100,000 [1] 5.75 6.46
$100,000 under $500,000 3.60 4.51
$500,000 or more N/A N/A

N/A--Not applicable because the achieved sample rate was 100 percent.

[1] Organizations with gross unrelated business income (UBI) between
$1 ,000 (the filing threshold) and $10,000 were not required to report
itemized expenses and deductions, or to complete return schedules.
Those with gross UBI over $10,000 were required to fill out a more
detailed "complete" return.
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Author:Riley, Margaret
Publication:Statistics of Income. SOI Bulletin
Date:Jan 1, 2008
Words:24882
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