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Unrelated Business Income Tax (UBIT) SEPTEMBER 4, 2014

Unrelated Business Income Tax (UBIT) SEPTEMBER 4, 2014. UBI at - Agenda . UBI Certification UBI Questionnaire UBI Financial Statement template Reconciliation to General Ledger UBI Tax Rates IRS Focus and Reminders. UBI Certification. UBI Certification.

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Unrelated Business Income Tax (UBIT) SEPTEMBER 4, 2014

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  1. Unrelated Business Income Tax (UBIT)SEPTEMBER 4, 2014

  2. UBI at - Agenda • UBI Certification • UBI Questionnaire • UBI Financial Statement template • Reconciliation to General Ledger • UBI Tax Rates • IRS Focus and Reminders

  3. UBI Certification

  4. UBI Certification • Dean, Director, Department Chair signs • Complete one per Department/Center, to reflect all UBI activities • Original signature – mail to Payroll and Tax Services (preferred) • Requires completion of UBI Questionnaire

  5. UBI Certification

  6. UBI Questionnaire

  7. UBI Questionnaire • Complete one for each activity • Complete one even if you have no UBI activity – your confirmation • Provide any comments/explanations as needed

  8. UBI Questionnaire

  9. UBI Guidelines

  10. UBI Guidelines • UBI General Guidelines • IRS Criteria (Publication 598 – Tax on Unrelated Business Income of Exempt Organizations) • Unrelated Activity examples • Related Activity examples • Potential Exclusions

  11. UBI Guidelines - Examples

  12. UBI Guidelines - Exclusions

  13. UBI Financial Statement Template

  14. UBI Financial Statement Template • UBI Financial Statement Template • Workbook includes multiple sheets • Improved reconciliations to GL • Consistency in reporting by units • Easier completion and review • Instructions sheet • Financial Statement (populated primarily by other sheets in the workbook) • UBI% Worksheet – calculation of UBI % used

  15. UBI Financial Statement Template

  16. UBI Financial Statement Template

  17. UBI Financial Statement Template • UBI Financial Statement Template (cont.) • Income – record amounts by GL account and source (up to 7 sources) • Cost of Goods Sold – record beginning and ending inventories and FY purchases by GL account and source • Personnel Costs – record amounts by GL account and source for any accounts supporting the unrelated activity • Costs for specific employees, if used, must reconcile to a Payroll Cost Distribution report

  18. UBI Financial Statement Template - Income

  19. UBI Financial Statement Template - Personnel

  20. UBI Financial Statement Template • UBI Financial Statement Template (cont.) • Non-Personnel Expenses • Grouped by category • Record by GL account and source • Totals flow to the Financial Statement Summary • Depreciation • Will be completed by Payroll and Tax Services • Departments may be asked to verify equipment/buildings used for UBI activities

  21. UBI Financial Statement Template – Non-Personnel Expenses

  22. UBI Financial Statement Template • UBI Financial Statement Template (cont.) • GL Account Descriptions • Resources/Links • Payroll and Tax Services website • IRS Publication 598 • UF Contact Information • Additional worksheets provided for your Supporting Schedules or Explanations

  23. UBI Financial Statement Template – GL Accounts, Resources and Contacts

  24. Reconciliation to the General Ledger

  25. Reconciliation to the General Ledger • Documentary evidence of reconciliation from the PeopleSoft GL to the submitted UBI Financial Statement is required • Examples of source documents: • Cash Summary • Appropriations Summary • Grant Projects Summary • KK to GL Summary • Cost Distribution Reports

  26. UBI Tax Rates • Federal: • Florida: 5.5% Corporate Income Tax Rate

  27. IRS Focus Areas • Continue to monitor: • Activities not “regularly carried on” • Lack of profit/profit motive – activities showing consistent losses (UF is required to net these losses to zero until profit is made again.) • Dual-use Expense Allocations – need to recognize all funding sources and subsidies if you are calculating a UBI % to be applied to your expenses (IRS says the losses are being subsidized from somewhere!)

  28. Reminders • UBI is complex with multiple criteria and exclusions, often requiring interpretation and a case-by-case analysis. • “Substance over form” - You may try to call income a qualified sponsorship, but if it has the characteristics of advertising, the IRS will likely conclude that it is. • University Payroll & Tax Services is willing to help you determine if an activity might generate UBI.

  29. Due Date Certifications, Financial Statements, and Supporting Schedules are due: Thursday, October 9, 2014 (for FY2013-2014) Questions, comments or requests for a departmental UBI visit, contact: University Payroll and Tax Services (352) 392-1231

  30. CPE Remember to sign-in today and complete an evaluation form to receive your CPE credit.

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