Who Must File Form 990-T? The $1,000 Rule Explained (2026 Guide)

Most tax-exempt organizations never pay federal income tax. But if your nonprofit earns money from an activity that has nothing to do with its mission, such as selling ads in a newsletter or running a café open to the public, the IRS may expect a separate tax return: Form 990-T.

Quick answer: You must file Form 990-T if your tax-exempt organization, exempt trust or IRA has $1,000 or more in gross income from a regularly conducted unrelated trade or business during the tax year. This includes 501(c)(3) charities, private foundations, churches, state colleges and universities, employee trusts, and IRAs and similar accounts. Gross income means gross receipts minus the cost of goods sold, not total sales.

This guide explains who must file Form 990-T, what counts as unrelated business income, and how to tell whether your organization crosses the line.

What Is Form 990-T?

Form 990-T is the Exempt Organization Business Income Tax Return. It reports income from unrelated business activities and calculates the tax owed on it, known as unrelated business income tax (UBIT).

It’s separate from your annual information return. Filing Form 990-T doesn’t replace Form 990, 990-EZ, 990-PF or 990-N. If you need both, you file both. Not sure which annual return applies to you? See our guide to Form 990 filing requirements.

Who Must File Form 990-T

According to the IRS instructions, the following must file when they have $1,000 or more of gross income from a regularly conducted unrelated trade or business:

Churches are a common blind spot

Churches aren’t required to file Form 990. Many church leaders assume that means they have no IRS filings at all. That isn’t true for unrelated business income. A church that rents its parking lot for paid commercial events or sells advertising, for example, may still need to file Form 990-T.

IRAs and retirement accounts

An IRA is tax-exempt, but certain investments inside it, such as a share in an operating business partnership or debt-financed real estate, can create unrelated business income. Each account is treated as a separate trust and needs its own EIN to file. The trustee or custodian files the return, and any tax is paid from the account, not by the owner personally.

Other reasons to file (even without $1,000 of UBI)

Some organizations file Form 990-T for other reasons, for example to:

• Report the proxy tax on certain lobbying and political expenses

• Claim a refund of tax paid by a regulated investment company (RIC) or real estate investment trust (REIT) on undistributed capital gains

• Make an elective payment election for certain clean energy credits

The $1,000 Rule: Gross Income, Not Gross Sales

This is the detail most organizations get wrong. The $1,000 threshold is based on gross income, which is:

Gross receipts − cost of goods sold = gross income

So a nonprofit can sell more than $1,000 of goods and still fall below the threshold.

Example: A youth charity runs a coffee cart open to the public twice a week. It takes in $1,600 in sales and spends $900 on coffee, milk and cups sold. Its gross income is $700, so it doesn’t need to file Form 990-T for that year.

One exception: for gaming activities, gross receipts include all amounts wagered, not just the net after prizes.

What Counts as Unrelated Business Income?

Income is unrelated business income only if all three of these are true:

1. It comes from a trade or business, meaning an activity carried on to earn income by selling goods or services.

2. It’s regularly carried on, with the frequency and consistency of a normal commercial business.

3. It isn’t substantially related to your exempt purpose, meaning the activity doesn’t meaningfully advance your mission (other than by raising money).

If even one is missing, the income isn’t UBI.

Common examples of unrelated business income

• Selling advertising in a magazine, newsletter or event program

• Running a café, store or service for the general public that’s unrelated to your programs

• Renting property with significant services (like a fully serviced event venue)

• Income from debt-financed property, such as rent from a building bought with a loan

• Your share of income from a partnership that runs an active business

Income that’s usually excluded

• Dividends, interest and royalties

• Most rent from real property (unless debt-financed or service-heavy)

• Activities where substantially all the work is done by unpaid volunteers

• Selling donated goods, which is why thrift stores usually don’t owe UBIT

• Qualified sponsorship payments that only acknowledge the sponsor

• Activities run mainly for the convenience of members, students, patients or employees (for 501(c)(3)s)

Example: A food bank sells $4,000 of ads in its monthly newsletter. Ads aren’t related to feeding people, and the newsletter is published regularly. With no cost of goods sold, gross income is $4,000, so the food bank must file Form 990-T. Tax applies only to the profit after directly connected expenses and a $1,000 specific deduction.

How the Tax Is Calculated (Simplified)

You don’t pay tax on gross income, only on unrelated business taxable income after deductions:

• Report each separate unrelated trade or business on its own Schedule A (Form 990-T).

• A loss from one activity can’t offset profit from another. It carries forward to future years for that same activity instead.

• Subtract a one-time $1,000 specific deduction (only one per organization, no matter how many businesses it runs).

• Organizations taxed as corporations pay a flat 21%. Trusts, including IRAs, use the trust tax rate schedule.

If you expect to owe $500 or more for the year, you generally must make quarterly estimated tax payments.

Form 990-T Due Dates

The dates above are for calendar-year filers. Fiscal-year organizations apply the same rule from their year-end. You can get an automatic 6-month extension with Form 8868, but any tax owed is still due by the original deadline. Our guide on how to file a Form 990 extension walks through Form 8868 step by step.

How to File Form 990-T

Form 990-T must be filed electronically through IRS-authorized e-file software or a tax professional. Paper filing isn’t an option for exempt organizations.

Before you file, gather:

• Your organization’s EIN (IRAs need their own EIN)

• Income and expense records for each unrelated activity

• The business activity code for each activity

• Records of any estimated tax payments

• Debt and property details, if any income is debt-financed

Remember to also report the unrelated business income and expenses on your Form 990, 990-EZ or 990-PF for the same year.

What Happens If You Don’t File?

If you’re required to file and don’t, the IRS can charge:

• Late filing penalty: 5% of the unpaid tax for each month or part of a month the return is late, up to 25%. For returns more than 60 days late, the minimum penalty is the smaller of the tax due or $525 (per the 2025 IRS instructions; this amount is adjusted for inflation each year).

• Late payment penalty: 0.5% of the unpaid tax per month, up to 25%

• Interest on unpaid tax from the original due date

Penalties may be removed if you can show reasonable cause. Your annual Form 990 has its own penalty rules, covered in our guide to Form 990 late filing penalties.

One more point many organizations miss: 501(c)(3) organizations must make their Form 990-T available for public inspection, just like Form 990.

Conclusion

If your organization earns $1,000 or more in gross income from a regular activity unrelated to its mission, you must file Form 990-T, whether you’re a charity, a private foundation, a church or an IRA. Start by checking each income source against the three-part test, then calculate gross income correctly (receipts minus cost of goods sold) before deciding whether you need to file.

Not sure whether your income counts as unrelated business income? Form 990 Series can review your activities and prepare and e-file your Form 990-T, with every filing supervised by an IRS Enrolled Agent. Contact us at support@form990series.com or call +1 (346) 439-0768.