Exceptions to UBI Requirements


Convenience Exception

Revenue from an activity conducted for the convenience of MIT faculty, staff and/or students in connection with their respective roles does not generate UBI.

Research Exception

In general, revenue received by MIT from research is excluded from UBI. There are certain situations, however, that require further analysis to determine whether or not they fit within the research exception. For example, commercial research and development for a for-profit sponsor would require closer scrutiny to determine whether or not the activity fits within the exception.

Passive Investment Income Exception

(Such as interest, annuities, rents from real property and royalties)
These types of income are generally not treated as UBI-generating. They do become taxable entirely or in part, however, if:

  • Provision of substantial services is part of the overall arrangement, so that the income is not wholly passive income;
  • The amount of the payment is based on a percentage of the payer's profits or income; or,
  • The underlying property generating the income is debt-financed and the transaction falls outside one of the debt-financed income exceptions.


Note: There is no equivalent exclusion for the rental of personal property, which generates taxable income if the rental activity meets the definition of UBI.

Qualified Sponsorship Payment Exception

When a donor makes cash or in-kind contributions to MIT and the donor's name and logo are merely acknowledged in a printed program or other University literature or on a building, no UBI is generated.

  • If a contribution is contingent on the donor receiving a financial benefit (known as a substantial return benefit) equal to more than 2 percent of the contribution, however, we need to assess whether the transaction fits within the qualified sponsorship payment exception or another exclusion from UBI.
  • Regulations in this area suggest that some of the UBI-generating arrangements tend to look like advertising or exclusive provider arrangements, but other situations can also raise questions.
  • Qualified sponsorship analysis focuses on arrangements that appear to be business transactions with a donor and, for example, would not include the mere establishment of a charitable remainder trust or charitable annuity trust.

Volunteer Exception

Revenue generated from an activity where substantially all the work is performed by volunteers does not generate UBI.

For more information on unrelated business income, see IRS Publication 598.