Current Events, Audit Issues, Governance Issues, Reporting Issues, Tax Issues

Does a Church Bookstore create UBIT?

So what types of receipts affect UBIT???

The sale of religious publications or sermon tapes is generally related to the exempt purposes of a church. A bookstore is a little trickier.

We can eliminate any bookstore that is:

(1) Run by unpaid volunteers

(2) Provided only for the convenience of church members, or

(3) Selling only merchandise received as contributions.

Maybe we do have UBIT

If your exempt organization is making money other than from contributions, you need to consider the possibility that you have unrelated business taxable income (UBIT). In our previous blog, we listed three easy exceptions. Activities that don't pass those exceptions need to consider the following three tests.

First, look at whether or not the activity is a business. Generally, this is any activity carried on to make a profit from the sale of goods or services.

What Do You Mean Unrelated Business Income?

Most churches and ministries believe everything they do is part of their overall mission to further the work of Christ. Therefore, there couldn't possibly be anything unrelated about their operations...or could there?

Many organizations operate book or music stores, concession stands, coffee shops, or teen game rooms. They may sell advertising spots in a magazine or rent space in their building. So they may, unknowingly, have unrelated business income subject to tax.

Let's look at how to determine if your organization has an issue.

Capitalizing Interest


Capitalizing Interest as a Construction Cost

How To Capitalize Interest as a Construction Cost

As construction begins on a facility, many churches finance the costs with external debt. The debt is not free since interest is paid periodically to the bank. The interest is also a cost of the construction of the asset and should be capitalized as part of the cost of the facility. The facility cost, including capitalized interest, is then depreciated over the estimated useful life of the asset – 40, 50, 70 years, or more.

Avoiding Campaign Activities

On June 1, 2006, the IRS issued a Newswire Release Number IR-2006-087 reminding charities to avoid campaign activities this election season.