UNRELATED BUSINESS INCOME TAX (UBIT) AUGUST 25, 2015

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

Changes to UBI Template Documents for Please take note….  Added question #9 to UBI Questionnaire regarding student participation and whether the student receives course credit  Reviewed and modified expense descriptions to match changes made in myUFL  Added GL accounts to expense worksheet for Federal (799910) and State (799920) UBI taxes paid  Federal tax cannot be included as an expense, but State tax is allowable  Modified UBI Financial Statement to include 100% of State taxes paid as expense

UBI Certification

 Dean, Director, Department Chair signs  Complete one per Department/Center, to reflect all UBI activities  Signature – mail to Payroll and Tax Services (preferred) or send electronically  Requires completion of UBI Questionnaire

UBI Certification

UBI Questionnaire

 Complete one for each activity  Complete one even if you have no UBI activity = confirmation  Provide any comments/explanations as needed

UBI Questionnaire

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

UBI Guidelines - Examples

UBI Guidelines - Exclusions

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

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

UBI Financial Statement Template - Income

UBI Financial Statement Template - Personnel

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

UBI Financial Statement Template – Non-Personnel Expenses

UBI Financial Statement Template – UBI % Worksheet

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

UBI Financial Statement Template – GL Accounts, Resources and Contacts

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

UBI Tax Rates  Federal:  Florida: 5.5% Corporate Income Tax Rate

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!)

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 taxable.  University Payroll & Tax Services is willing to help you determine if an activity might generate UBI.

Due Date Certifications, Financial Statements, and Supporting Schedules are due : Friday, September 25, 2015 (for FY ) Questions, comments or requests for a departmental UBI visit, contact: University Payroll and Tax Services (352)

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