The Internal Revenue Service’s (IRS) next compliance check on the tax-exempt sector may be directed at unrelated business income taxes, according to a report in The Bureau of National Affairs (BNA).

While not a formal audit, the Service has been using compliance check questionnaires to gather information and promote voluntary compliance with different segments of the tax-exempt community. Recent compliance checks have focused on tax-exempt hospitals and colleges and universities. UBIT is “tailor made” for a compliance check according to the former director of the Exempt Organizations Division at the IRS.

The IRS defines unrelated business income as revenue generated from activities that are not substantially related to a tax-exempt organization’s mission or exempt purpose. UBIT rules impose an income tax on an exempt organization’s net income derived from unrelated business activities.