Appendix Appendix A. Definitions — 2025 Inst 990-T (PDF)

Section 501(c)(3) organization. Section 501(c)(3) describes certain organizations which are exempt from taxation under section 501(a). A 501(c)(3) organization is an organization organized and operated exclusively for charitable purposes. See Regulations section 1.501(c) (3)-1(a).

Annual return. An annual return (for purposes of the public inspection rules discussed below) is an exact copy of the Form 990-T that was filed with the IRS, including all schedules

Qualifying partnership interests;
Qualifying S corporation interests; and
Certain gross income of organizations subject to section 512(a)(3), or 501(c)(7), (9), or (17).

901301. Insurance income derived from controlled foreign corporations (section 512(b)(17)).

903###. Passive income activities with controlled organizations.

904###. Nonqualifying S corporation interests.

You must report each separate unrelated trade or business using the

and attachments. It also includes any amendments to the original return (amended return).

By annual return (for purposes of the public inspection rules discussed below), we mean any annual return (defined above) that isn’t more than 3 years old from the later of:

The date the return is required to be filed (including extensions), or
The date that the return is actually filed.

Directly connected expenses. To be deductible in computing UBTI, expenses, depreciation, and similar

section 512(a)(6) without regard to the specific trade or business engaged in by the partnership or S corporation. See Regulations section 1.512(a)-6.

first two digits of the NAICS code that most accurately describes the unrelated trade or business based on the more specific NAICS code, such as at the 6-digit level. Investment activities reported as separate trades or businesses that are identified with a non-NAICS business activity code should use the 6-digit code from the list above. See Regulations section 1.512(a)-6(b)(1).

Item C at the top of Schedule A (Form 990-T) requires a 6-digit entry. Enter a 2-digit NAICS code by entering the first digits followed by four zeros.

items must qualify as deductions allowed by section 162, section 167, or other sections, and must be directly connected with the conduct of unrelated trade or business activity.

To be directly connected with the conduct of an unrelated trade or business activity, expenses, depreciation, and similar items must bear a proximate and primary relationship to the conduct of the activity. For example, where facilities and/or personnel are used both to conduct exempt activities and to conduct an unrelated trade or

Instructions for Form 990-T (2025) 37

or more hospitals subject to conditions in section 513(e); or

That consists of qualified pole rentals, as defined in section 501(c)(12)(D), by a mutual or cooperative telephone or electric company; or
That includes activities relating to the distribution of low-cost articles, each costing $13.60 or less, by an organization described in section 501 and contributions to which are deductible under section 170(c) (2) or (3) if the distribution is incidental to the solicitation of charitable contributions; or
That includes the exchange or rental of donor or membership lists between organizations described in section 501 and contributions to which are deductible under section 170(c) (2) or (3); or
That consists of bingo games as defined in section 513(f). Generally, a bingo game isn’t included in any unrelated trade or business if:

a. Wagers are placed, winners

are determined, and prizes are distributed in the presence of all persons wagering in that game; and

b. The game doesn’t compete

with bingo games conducted by for-profit businesses in the same jurisdiction; and

c. The game doesn’t violate

state or local law; or

That consists of conducting any game of chance by a nonprofit organization in the state of North Dakota and the conducting of the game doesn’t violate any state or local law; or
That consists of soliciting and receiving qualified sponsorship payments that are solicited or received after December 31,
Generally, qualified sponsorship payment means any payment to a tax-exempt organization by a person engaged in a trade or business in which there is no arrangement or expectation of any substantial return benefit by that person other than the use or

business, expenses and similar items attributable to such facilities and/or personnel must be allocated between the two uses on a reasonable basis. The portion of any such item allocated to the unrelated trade or business must bear a proximate and primary relationship to that unrelated trade or business.

Not substantially related to. “Not substantially related to” means the activity that produces the income doesn’t contribute importantly to the exempt purposes of the organization, other than the need for funds. Whether an activity contributes importantly depends in each case on the facts involved.

For details, see Pub. 598, Tax on Unrelated Business Income of Exempt Organizations.

Trade or business. A trade or business is any activity conducted for the production of income from selling goods or performing services. An activity must be conducted with intent to profit to constitute a trade or business. An activity doesn’t lose its identity as a trade or business merely because it is conducted within a larger group of similar activities that may or may not be related to the exempt purpose of the organization. If, however, an activity conducted for profit is an unrelated trade or business, no part of it can be excluded from this classification merely because it doesn’t result in profit.

Separate trade or business. An organization with more than one unrelated trade or business should refer to Regulations section 1.512(a)-6 to determine if two or more trades or businesses are separate trades or businesses for purposes of calculating UBTI.

Unrelated trade or business in- come. Unrelated trade or business income is the gross income derived from any trade or business (defined above) regularly carried on and not substantially related to (defined above) the organization’s exempt purpose or function (aside from the organization’s need for income or funds or the use it makes of the profits).

Generally, for section 501(c)(7), (9), or (17) organizations, unrelated trade or business income is derived

from nonmembers with certain modifications (see section 512(a)).

For a section 511(a)(2)(B) state college or university, or a corporation wholly owned by such a college or university, unrelated trade or business income is derived from activities not substantially related to exercising or performing any purpose or function described in section 501(c)(3). An unrelated trade or business doesn’t include a trade or business:

In which substantially all the work is performed for the organization without compensation; or
That is conducted by a section 501(c)(3) or 511(a)(2)(B) organization mainly for the convenience of its members, students, patients, officers, or employees; or
That sells items of work-related equipment and clothes, and items normally sold through vending machines, food dispensing facilities or by snack bars, by a local association of employees described in section 501(c)(4), organized before May 27, 1969, if the sales are for the convenience of its members at their usual place of employment; or
That sells merchandise substantially all of which was received by the organization as gifts or contributions; or
That consists of qualified public entertainment activities regularly conducted by a section 501(c) (3), (4), or (5) organization as one of its substantial exempt purposes (see section 513(d)(2) for the meaning of qualified public entertainment activities); or
That consists of qualified convention or trade show activities regularly conducted by a section 501(c)(3), (4), (5), or (6) organization as one of its substantial exempt purposes (see section 513(d)(3) for the meaning of qualified convention and trade show activities); or
That furnishes one or more services described in section 501(e)(1)(A) by a hospital to one

38 Instructions for Form 990-T (2025)

and claims over a $500 deduction for the property, it must attach a statement to the return describing the kind of property contributed and the method used to determine its FMV. All organizations must generally complete and attach Form 8283, Noncash Charitable Contributions, to their returns for contributions of property (other than money) if the total claimed deduction for all property contributed was more than $5,000. Special rules apply to the contribution of certain property. See the Instructions for Form 8283. A donee organization must use Form 8282, Donee Information Return, to report information to the IRS and donors about dispositions of certain charitable deduction property made within 3 years after the donor contributed the property. See the Instructions for Form 8282.

Special rules for contributions of certain easements in registered historic districts. The following rules apply to certain contributions of real property interests located in a registered historic district.

A deduction is allowed for the qualified real property interest, if the exterior of the building (including the front, side, rear, and space above the building) is preserved and no portion of the exterior is changed in a manner that is inconsistent with its historical character. See section 170(h)(4)(B).
A deduction is allowed on the building only (no deduction is allowed for a structure or land) if located in a registered historic district. However, if listed in the National Register, a deduction is also allowed for structures or land areas. See section 170(h)(4)(C).
The organization must also include the following information with the tax return.

A qualified appraisal (as defined in section 170(f)(11) (E)) of the qualified property interest.
Photographs of the entire exterior of the building.
A description of all restrictions on the development of the building. See section 170(h)(4)(B)(iii).

acknowledgment of that person’s name, logo, or product lines in connection with the activities of the tax-exempt organization. See section 513(i).