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Form 990-T: When Nonprofits Must File and How to Pull UBTI From the Ledger
Last updated: October 9, 2026 · Independent guide · We do not sell rankings or coverage.
A tax-exempt organization must file Form 990-T when it has gross income of $1,000 or more from a regularly conducted unrelated trade or business, such as selling advertising in its magazine or running a public parking lot. The test uses gross income (gross receipts minus cost of goods sold), not profit, so you can owe a Form 990-T even when the activity loses money. The return must be e-filed, is due on the 15th day of the 5th month after year end for most nonprofits, and reports each unrelated business separately on its own Schedule A.
The rule in brief
- Who files: exempt organizations, state colleges, and exempt trusts and IRAs with gross income of $1,000 or more from a regularly conducted unrelated trade or business (IRS, Instructions for Form 990-T (2025), checked October 9, 2026).
- Separate silos: under IRC 512(a)(6) and Treas. Reg. 1.512(a)-6, you compute unrelated business taxable income (UBTI) separately for each unrelated business, so a loss in one cannot offset income in another.
- Due date: the 15th day of the 5th month after year end (the 4th month for employees’ trusts and IRAs). Form 8868 gives an automatic 6-month extension to file, but not to pay.
- Filing method: organizations and trusts defined in section 511 must file Form 990-T electronically.
- Tax: 21% for organizations taxed as corporations, trust rates for exempt trusts, after a single $1,000 specific deduction.
- Official sources: IRS Instructions for Form 990-T (2025), Publication 598 and Treas. Reg. 1.512(a)-6. We checked them on October 9, 2026.
What counts as unrelated business income
Publication 598 defines unrelated business income through three tests. The activity must be a trade or business, it must be regularly conducted, and it must not be substantially related to your exempt purpose, meaning it does not “contribute importantly” to that purpose other than by raising money (IRS, Publication 598, rev. March 2021, checked October 9, 2026). The IRS illustrates “regularly conducted” with a hospital auxiliary’s two-week sandwich stand at a state fair, which is not regular, and a commercial parking lot operated every Saturday year-round, which is.
Publication 598 says advertising in an exempt organization’s publication “is generally presumed to be placed for the purchaser’s commercial benefit, even if it has no commercial message.” A qualified sponsorship payment that buys only acknowledgment of the sponsor’s name or logo is not taxable. It becomes advertising if you endorse the sponsor’s products, use price or comparative language, or place the acknowledgment in a regularly scheduled periodical.
Common exclusions include rents from real property (unless debt-financed or based on the tenant’s profits, and with limits for mixed leases that include personal property), dividends, interest and royalties (unless from a controlled organization), businesses run substantially by volunteers, and sales of donated merchandise.
What the rule requires in detail
You file one Form 990-T with a separate Schedule A for each unrelated trade or business. Total UBTI on Part I is the sum of the Schedule A results, less charitable contributions, pre-2018 losses and one $1,000 specific deduction, however many businesses you run.
The silo rules under IRC 512(a)(6)
The 990-T instructions state that “an exempt organization may not aggregate income and deductions from all unrelated trades or businesses when calculating UBTI,” and that UBTI for any one trade or business “shall not be less than zero.”
Treas. Reg. 1.512(a)-6(b) identifies each separate trade or business by “the first two digits of the North American Industry Classification System code” that describes the unrelated activity, not your exempt purpose (eCFR, 26 CFR 1.512(a)-6, up to date as of October 7, 2026). Each two-digit code is used once, and a change of code from the prior year needs an attached statement and can affect loss carryforwards. Investment activities, including qualifying partnership interests (generally 2% or less under the de minimis test, or 20% or less of capital under the participation test) and debt-financed property, form one combined silo under Reg. 1.512(a)-6(c).
Allowable deductions
To be deductible, an expense must qualify under section 162, section 167 or another Code section and be “directly connected” with the unrelated business, which the instructions define as having “a proximate and primary relationship” to it. Where facilities or staff serve both exempt and unrelated activities, you allocate on a reasonable basis under Reg. 1.512(a)-1(c). With more than one silo, you must allocate indirect costs among the unrelated businesses as well as between exempt and taxable activity, and Reg. 1.512(a)-6(f) applies the same method.
The instructions add that a gross-to-gross allocation by revenue share “is not reasonable” when the cost of a good or service is about the same but you charge different prices for related and unrelated use. Other deduction rules:
- Charitable contributions: generally capped at 10% of UBTI for corporations, with a 5-year carryover.
- Net operating losses: post-2017 losses stay in their silo and offset no more than 80% of taxable income. Pre-2018 losses offset total UBTI.
- Advertising: excess readership costs can reduce advertising income only to zero, never below (Publication 598).
Illustrative example (constructed, not a real organization)
A trade association sells advertising in its monthly journal and runs a public parking lot on weekends. The table shows how the silos work.
| Item | Journal advertising (NAICS 51) | Parking lot (NAICS 81) | Note |
|---|---|---|---|
| Gross income | $80,000 | $40,000 | Combined $120,000, well over the $1,000 filing test |
| Directly connected costs | $50,000 direct advertising costs | $52,000 (attendants, insurance, allocated depreciation) | Allocation of shared costs documented |
| Excess readership costs | $15,000 ($35,000 readership costs less $20,000 circulation income) | Not applicable | Can reduce advertising income to zero, not below |
| UBTI for the silo | $15,000 | $0 (the $12,000 loss carries forward in this silo only) | Silo cannot go below zero |
Total UBTI is $15,000, less the $1,000 specific deduction, or $14,000, and tax at 21% is $2,940. Before section 512(a)(6), the parking loss would have reduced UBTI to $2,000 and tax to $420. Because the expected tax is over $500, the association should also be making quarterly estimated payments.
Who is exempt from filing
You do not file Form 990-T if gross unrelated business income across all activities is under $1,000, or if all your income falls under an exclusion. Separately incorporated local units file their own returns, while unincorporated parishes or districts are reported by the parent diocese or convention.
Excluded income still appears on Form 990. Part VIII puts unrelated business revenue in column (C) and excluded revenue in column (D), and Part V line 3a asks whether gross unrelated income reached $1,000 (IRS, Form 990 (2025), checked October 9, 2026). Filing Form 990 does not replace Form 990-T. Our guide to Form 990 preparation from your accounting system covers the rest of that return.
Deadlines, e-filing and penalties
For a calendar-year nonprofit, the 2025 Form 990-T was due May 15, 2026. With a Form 8868 extension, the deadline is November 15, 2026, a Sunday, so the return is due Monday, November 16, 2026. For tax year 2026, May 15, 2027 falls on a Saturday, so the original due date is Monday, May 17, 2027.
The IRS says Form 990-T for tax years ending December 2020 and later “MUST be filed electronically and not on paper” (IRS, E-file for charities and nonprofits, June 28, 2026). You file through software on the IRS’s list of approved providers for Form 990-T, which for tax year 2025 includes CCH, Lacerte, Drake, GoSystem, Thomson Reuters CS Professional Suite and Tax990 (IRS, Tax year 2025 MeF providers for Form 990-T, July 17, 2026). Tax990, which sells the service, publishes a price of $119.90 per Form 990-T, with Form 8868 $14.90 when filed separately (Tax990 pricing, no date shown, checked October 9, 2026).
The penalties in the 2025 instructions are:
- Late filing: 5% of unpaid tax per month or part of a month, up to 25%. For a return more than 60 days late, the minimum is the smaller of the tax due or $525.
- Late payment: generally 0.5% of unpaid tax per month, up to 25%.
- Estimated tax: installments are required if expected tax is $500 or more, with an underpayment penalty under section 6655.
Records you must keep
The IRS’s general rule is to keep records for 3 years from filing, 6 years if you omit income of more than 25% of gross income shown on the return, and indefinitely if you do not file (IRS, How long should I keep records, June 30, 2026). Because post-2017 losses carry forward without expiry, keep each silo’s loss support until the loss is used. Also keep the written allocation method for each shared cost, its inputs (square footage, time records, page counts), each silo’s NAICS code history and a reconciliation from the trial balance to each Schedule A. A 501(c)(3) must make its Form 990-T available for public inspection for 3 years from the due date, including extensions.
What to set up in your systems to comply
Form 990-T is much easier when the ledger already separates unrelated activity. The table shows a practical tagging model.
| Ledger element | What to set up | Feeds |
|---|---|---|
| Revenue accounts | Separate accounts for advertising, sponsorship, real and personal property rent, and sales | Schedule A Part I; Form 990 Part VIII columns (C) and (D) |
| Activity dimension or class | One value per silo (for example, UBI-51 Advertising, UBI-81 Parking), plus Exempt | One Schedule A per value |
| Direct expense coding | Require the activity tag on invoice and payroll lines | Schedule A Part II deductions |
| Allocation entries | Recurring entries moving a documented share of rent, depreciation and staff cost to each silo | Dual-use deductions and audit support |
| Periodical cost accounts | Split direct advertising costs, readership costs and circulation income | Schedule A Part IX |
Sage Intacct. Sage describes a dimension as “a tag with a set of values related to transactions and entries” and lets you create user-defined dimensions, for which additional fees can apply (Sage Intacct help, October 8, 2026). A UBI activity dimension gives you one income statement per silo, which your preparer keys or imports into tax software. See our Sage Intacct for nonprofits guide.
QuickBooks Online. Class tracking is available in the Plus and Advanced plans, and you can assign a class to a whole transaction or to each line (Intuit, updated August 3, 2026). Classes often already carry programs or functions, so a UBI silo may compete for the same field. If so, our nonprofit accounting software comparison covers systems with more dimensions.
How we researched this
We read the 2025 Instructions for Form 990-T, Publication 598, Treas. Reg. 1.512(a)-6 on eCFR and the IRS pages on e-filing, approved providers, Form 990 and record retention, all checked on October 9, 2026. We then reviewed vendor documentation from Sage Intacct, Intuit and Tax990, which describe products those companies sell. We also read the ranking pages from Tax990, Haven, Madras Accountancy and Aplos; none showed how to tag silos and allocations in the ledger.
Related guides
- Church Fund Accounting Software: Requirements and Options
- De Minimis Indirect Cost Rate (15%): Nonprofit Setup Guide
- Schedule of Expenditures of Federal Awards (SEFA) Guide
Frequently asked questions
Do we have to file Form 990-T if the unrelated activity lost money?
Yes, if gross income from unrelated businesses was $1,000 or more. Gross income means gross receipts minus cost of goods sold, before other expenses.
Is rental income from our building taxable unrelated business income?
Usually not. Rents from real property are excluded from UBTI. They become taxable if the property is debt-financed, if the rent is based on the tenant’s profits, or, under a mixed lease, to the extent the rent is for personal property when that share is more than 10% of the total rent (all of the rent is taxable when it is more than 50%).
Can a loss from one unrelated business offset income from another?
No. Under IRC 512(a)(6), each unrelated trade or business is a separate silo whose UBTI cannot go below zero. A loss carries forward and can be used only against future income from the same two-digit NAICS activity.
When is Form 990-T due for a calendar-year nonprofit?
On May 15 following the year end, moved to the next business day when it falls on a weekend. With Form 8868, the filing deadline extends 6 months, to November 16, 2026 for the 2025 return. Any tax is still due by the original date.
Sources
- IRS, Instructions for Form 990-T (2025), checked October 9, 2026. irs.gov
- IRS, Publication 598, Tax on Unrelated Business Income of Exempt Organizations, rev. March 2021, checked October 9, 2026. irs.gov
- eCFR, 26 CFR 1.512(a)-6, Special rules for organizations with more than one unrelated trade or business, up to date as of October 7, 2026. ecfr.gov
- IRS, Form 990 (2025), Return of Organization Exempt From Income Tax, checked October 9, 2026. irs.gov
- IRS, E-file for charities and nonprofits, June 28, 2026. irs.gov
- IRS, Tax year 2025 exempt organizations Modernized e-File (MeF) providers, Form 990-T, July 17, 2026. irs.gov
- IRS, How long should I keep records?, June 30, 2026. irs.gov
- Tax990 (vendor), Pricing, no date shown, checked October 9, 2026. tax990.com
- Sage Intacct (vendor), Dimensions overview, October 8, 2026. intacct.com
- Intuit (vendor), Turn on class tracking in QuickBooks Online, August 3, 2026. quickbooks.intuit.com
Sherman Hsieh
Independent analysis of enterprise software — ERP, CRM and more
