1. Unrelated Business Income Tax (UBIT) AUGUST 16, 2018

2. UBI at UF - Agenda UBI Certification UBI Questionnaire UBI Guidelines
UBI Financial Statement Template
Reconciliation to General Ledger
UBI Tax Rates
IRS Focus and Reminders
Today, we will be covering the various reporting forms for unrelated business income, including a certification form, questionnaire, and financial statement template (if you are asked to prepare one).

3. UBI Certification

4. UBI Certification Dean, Director, Department Chair signs
Complete one per Department/Center, to reflect all UBI activities
Sign, scan, and send electronically (preferred) to Payroll and Tax Services
Requires completion of UBI Questionnaire
Please remember to complete the UBI Questionnaire (Page 2 of the Certification) and return it along with the Certification

5. UBI Certification SAMPLE
Contact Information for the department
A list of the activities and funding source(s)
Certifications section at the bottom

6. UBI Questionnaire

7. UBI Questionnaire
Complete one for each revenue- generating activity conducted by the department
Complete one even if you have no UBI activity (provides confirmation)
Include any comments/explanations where needed
Please describe your activity(ies) in the box at the top. The more information you can provide, the less likely we’ll need to contact you for clarification.
You should complete a questionnaire, even if your activities are not subject to unrelated business income tax. Remember, the questionnaire is actually part of the UBI Certification form.
Please include notes or any requests for clarification if you are unsure.

8. UBI Questionnaire
The purpose of the form is to help identify the circumstances that give rise to unrelated business income, and also to review the exclusions that may apply.
Remember: Profit motive means you intend to make an overall net profit. If you are conducting the activity merely to offset a portion of the costs, or intending to only “break-even”, there is not a profit motive.

9. UBI Questionnaire
The purpose of the form is to help identify the circumstances that give rise to unrelated business income, and also to review the exclusions that may apply.
Remember: Profit motive means you intend to make an overall net profit. If you are conducting the activity merely to offset a portion of the costs, or intending to only “break-even”, there is not a profit motive.
Final Question: Based on your responses and understanding of UBI, are you concluding that your activity IS or IS NOT subject to unrelated business income tax?
If you have no UBI activity, you will select “No” for #19 and indicate “NONE” on the UBI Certification for the Activity Description.

10. UBI Guidelines

11. 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

12. UBI Guidelines - Examples
Here are a few examples of unrelated activities (read 4 and 7)
Here are a couple of examples of related activities (read 3 and 6)

13. UBI Guidelines - Exclusions
Andrea already covered these, but we provide another quick summary for your reference as well (member convenience, donated property, real property rental…)

14. UBI Financial Statement Template

15. UBI Financial Statement Template
Excel workbook includes multiple sheets
Improves reconciliation to general ledger
Creates consistency in reporting by units
Easier completion and review process
Instructions sheet
Financial Statement (populated primarily by other sheets in the workbook)
UBI% Worksheet – calculation of UBI % used
We’re going to walk through the UBI Financial Statement template (an Excel Workbook that contains multiple sheets)
Instruction are included to help guide your completion.
The FINANCIAL STATEMENT sheet is populated by entries on other sheets. This summary is used to help consolidate all of UF’s unrelated business income reporting to the IRS.

16. UBI Financial Statement Template
3 Parts (Income, Cost of Goods Sold, and Expenses)
Fields in blue highlight are formula driven and populated from other sheets in the workbook.

17. UBI Financial Statement Template
The lower portion of the FS template, including overhead costs (which do count as expenses)
Note the depreciation portion at the bottom. Our office maintains and calculates depreciation for your applicable UBI assets. We may contact you to verify the assets that are used in your activities.

18. UBI Financial Statement Template
UBI Financial Statement Template (cont.)
Income – record amounts by GL account and Cost Center (up to 7 sources)
Cost of Goods Sold – record beginning and ending inventories and FY purchases for resale by GL account and Cost Center
Personnel Costs – record amounts by GL account and Cost Center for any accounts supporting the unrelated activity
Costs for specific employees, if used, must reconcile to a Payroll Cost Distribution report
Now, for additional sheets in the template workbook (Income, COGS, and Personnel Costs)
Note, if you identify specific employee costs (rather than a percentage of total personnel costs for the department), you MUST reconcile the costs shown to a Payroll Cost Distribution report or other similar delivered report from myUFL.

19. UBI Financial Statement Template - Income
SAMPLE
We’ve included the UBI-related revenue accounts.
Pay close attention to (Sales & Services – External). This is the primary ledger account used to identify external sales that may be subject to UBI (since internal sales are excluded)
Input the corresponding revenues (up to seven different cost centers can be used -- see the columns).

20. UBI Financial Statement Template - Personnel
SAMPLE
Personnel Costs:
Input your personnel costs from your source document (usually a myUFL delivered report).
Note at the bottom that if specific employees are used for your UBI personnel costs, you should reconcile to a Cost Distribution report and provide that report to us as your backup.

21. UBI Financial Statement Template
Reminder -
Amounts recorded on these supporting worksheets must reconcile to the general ledger activity reflected in myUFL.
Continuing with the workbook, let’s look at a few more sheets…

22. UBI Financial Statement Template
UBI Financial Statement Template (cont.)
Non-Personnel Expenses
Grouped by category
Record expenses by GL account and Cost Center
Totals flow to the UBI Financial Statement worksheet
UBI % Worksheet
Used to calculate a UBI % to apply to dept. costs
Depreciation
Prepared by Payroll and Tax Services
Departments may be asked to verify equipment and buildings used in their UBI activities

23. UBI Financial Statement Template – Non-Personnel Expenses
SAMPLE
Non-Personnel Expenses:
Various expenses are grouped and subtotals flow from this sheet to the Financial Statement sheet at the beginning of the workbook.
Record your department general ledger expenses into the corresponding accounts on this sheet.
Again, up to seven Cost Centers can be included.

24. UBI Financial Statement Template – UBI % Worksheet
SAMPLE
UBI % Sheet:
This sheet populates from the Income sheet in the workbook.
Here, we assume that all external sales are UBI, divide the external total by the total income to calculate a UBI %.
The UBI % is then used to allocate the personnel and non-personnel expenses from your department ledger to determine the actual UBI portion of those costs.
If you are using an alternative methodology (e.g. specific revenues/expenses are identified for UBI), you must provide us with supporting documentation for your calculations.

25. 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
Some final sheets in the workbook…
Additional worksheets used for your supporting calculations, schedules, or other documentation. If you do not use these sheets for your documentation, please remember to submit all supporting schedules with your Financial Statement template by the due date.

26. UBI Financial Statement Template – GL Accounts, Resources and Contacts
In addition to the specific staff listed above, you may (a group that we all monitor)

27. Reconciliation to the General Ledger

28. 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
Reconciling to the General Ledger is critical to the reporting process.
Use various delivered reports or Enterprise Reporting reports to reconcile.
If we are unable to adequately tie your data to myUFL or supporting documentation, we will contact you for further information.

29. Reconciliation to the General Ledger
Navigate in myUFL to Enterprise Reporting > Department Reports
Select your College and then the Department
Choose the Period and Year, June 20XX
Select the Cash Summary (PDF or Excel)
Delivered Department Reports: Cash Summary (is a good source for reconciliation purposes)

30. Reconciliation to the General Ledger
The Cash Summary provides the YTD Expenses by GL Account to record in the UBI Financial Statement Template
Here is a sample of the Cash Summary report.
Note costs are detailed by GL account.
Use these amounts to populate your various income and expense sheets in the template workbook.

31. UBI Tax Rates
Federal: For FY , we have a blended rate based on the schedule below and a flat 21% (beginning 1/1/2018):
Florida: 5.5% Corporate Income Tax Rate
So, what will it cost the department if you have net unrelated business income?
-Federal tax is a tiered scale based on the level of income. Beginning 1/1/18, a 21% flat rate applies.
-Florida corporate tax rate is 5.5%
****Remember, it is okay to have net unrelated business income. We do not discourage it. Just remember to reserve sufficient funds to pay any resulting taxes.

32. IRS Focus Areas The IRS continues to watch for:
Activities not “regularly carried on” – should not be included on Form 990-T
Lack of a profit/profit motive – activities showing consistent losses (UF is required to net these losses to zero until profit is realized.)
Dual-use Expense Allocations – Depts. should account for all funding revenue sources and subsidies when calculating the UBI % to be applied to expenses
IRS says overall losses are being subsidized from “somewhere”

33. Reminders
UBI is complex with multiple criteria and exclusions, often requiring interpretation on a case-by-case analysis.
“Substance over form” - You may call income a qualified sponsorship and try to exclude it, but if it has the characteristics of advertising, the IRS will likely conclude that it is UBI and subject to tax.

34. University Payroll and Tax Services
Due Date
Certifications, Financial Statements, and Supporting Schedules are due:
Friday, September 21, 2018
(for FY )
Questions, comments, or requests for a departmental UBI visit?
University Payroll and Tax Services
(352) or
The reporting deadline is 9/21/18. We will be posting the updated forms and template workbook to our website, as well as sending s to those departments with potential external revenues to report.

35. CPE
Remember to sign-in. Sign the CPE sheet if you’d like to receive CPE credit for your attendance today.