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AFP Chapters and Unrelated Business Income Tax (UBIT)

March 16, 2015

Unrelated Business Income Tax (commonly referred to as UBIT) rules require tax-exempt organizations, including 501(c)(3) organizations, to pay income tax when those organizations regularly carry on a trade or business that is not substantially related to the organizations’ exempt purposes. An example of an activity subject to UBIT is a university that owns/runs a restaurant that advertises to non-student customers. This is a business that the university regularly carries on that is not substantially related to the university’s education purpose. Therefore, the income from the restaurant is subject to UBIT. 

Association of Fundraising Professionals (AFP) Chapters may find their chapter job boards reviewed by the Internal Revenue Service (IRS) to determine whether that activity is subject to UBIT, as an activity not substantially related to the performance of the chapter for its 501(c)(3) purpose.

To help ensure that chapter job boards are exempt from UBIT, chapters can do the following: 

1.  Demonstrate that the job board revenue is a royalty, which is not subject to UBIT, under a license to a third party that provides the service to members (e.g., the chapter hires a vendor to run the job board using a licensing agreement that stipulates that the vendor will pay the chapter a royalty fee); or

2.  Demonstrate that the job board is not in existence to provide a profit to the chapter but is instead an essential service to the local industry and the unique nature of the fundraising profession, that the job board benefits the charitable community by connecting qualified fundraising professionals with job openings at nonprofit organizations. 

If the chapter is not able to demonstrate either of these situations, it will most likely be subject to UBIT. 

Please contact Jason Lee, JD, AFP’s General Counsel, if you have any questions at


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