Income generating activity is "unrelated" if it does not "contribute substantially" to the exempt purpose.

Since a nonprofit organization is usually subject to unrelated business income tax (UBIT) on income from a trade or business which is regularly carried on and which is "unrelated" to its exempt purpose, it is critical to determine whether an activity is "related" to the organization’s exempt purpose.

According to the Regulations, an activity is deemed to be unrelated if it is "not substantially related," other than through the production of funds, to the exempt purpose of the organization. To be substantially related, the activity must "contribute importantly to the accomplishment" of the exempt purposes.

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