Form It-20np - Nonprofit Organization Unrelated Business Income Tax Booklet

Questions K and L

a trade or business activity regularly carried on by the nonproﬁt

organization that is not substantially related to its exempt

Check or complete all boxes that apply for your return.

purpose. Indiana follows the Internal Revenue Service’s rulings

regarding types of income substantially related to or not related

K-1 Is this filing your initial return for the State of Indiana?

to an organization’s exempt purpose. Refer to Internal Revenue

Service Publication 598.

K-2 Is this filing your final return for the state of Indiana? Check

this box only if the organization is dissolved, is liquidated, or

Exclusions from Unrelated Business Income

withdrew from the state. Also, you must timely file Form

Exceptions that do not constitute income from an “unrelated

BC-100 to close out any sales and withholding accounts. Go to

trade or business” include

to complete this form online.

(1) Any trade or business in which substantially all the work

K-3 Check this box if the organization is in bankruptcy.

is performed for the organization without compensation;

(2) Any trade or business carried on by a charitable

organization or by a state college or university primarily

K-4 Check this box if filing Indiana Schedule M, Alternate

for the convenience of its members, students, patients,

Adjusted Gross Income Tax Calculation.

ofﬁcers, or employees;

L Check the Yes box if an extension of time to ﬁle your return is in

(3) Any trade or business consisting of selling merchandise,

substantially all of which has been received by the

effect. If applicable, enclose a copy of federal Form 7004 when

organization as gifts or contributions;

filing your state return.

(4) The furnishing by a qualiﬁed hospital at or near cost of

certain common services, including purchasing, billing

How to Report Charity Gaming Receipts

and collection, and record keeping, to small hospitals, i.e.

Exempt nonproﬁt organizations do not pay income taxes on

serving fewer than 100 in-patients;

the proceeds from licensed charity gaming events. For further

(5) Qualiﬁed public entertainment activities of certain

information, contact the Indiana Gaming Commission, 101

types of exempt organizations when a qualifying

W. Washington Street, East Tower, Suite 1600, Indianapolis, IN

organization regularly conducts as one of its substantial

46204, or visit their website at All nonproﬁt

exempt purposes an agriculture and educational fair or

organizations must report unrelated business income. The

exposition;

corporate adjusted gross income tax is computed on the nonproﬁt

(6) Qualiﬁed convention and trade show activities of a

organization unrelated business income return.

qualifying organization that regularly conducts, as one of

its substantial exempt purposes, a show that stimulates

Report of Unrelated Business Income

interest in, and demand for, the products of a particular

All organizations exempt under IC 6-2.5-5-21 described in

industry or segment of an industry;

Internal Revenue Code (IRC) 501(c) and IRC 401(a), including

(7) Certain charity gaming events as long as the organization

churches, religious organizations, hospitals, social organizations,

is properly licensed;

business leagues, pension trusts, and all other institutions, that are

(8) Certain pole rentals, by a mutual or cooperative

subject to the tax imposed by IRC 511 are also subject to Indiana

telephone or electric company;

adjusted gross income tax on their unrelated business income.

(9) Certain distributions of low-cost articles, incidental

to the solicitation of charitable contributions, and

IC 6-3-2-3.1 provides that only the unrelated business income

the exchange or rental of mailing lists by charitable

(as deﬁned in IRC 513) of an organization otherwise exempt

organizations; and

from adjusted gross income tax under IC 6-3-2-2.8(1) is subject

(10) Sponsorship payments for which the payer receives

to adjusted gross income tax. (This section does not apply to the

no substantial return beneﬁt other than the use or

United States, its agencies or instrumentalities or to the State of

acknowledgement of the name, logo, or product lines

Indiana, its agencies or political subdivisions.)

of the payer’s trade or business in connection with the

organization’s activities.

Pension trusts that would be taxed as a trust were it not for the

exemption under IRC Section 501(a) will be taxed as a trust on

Adjusted Gross Income Tax Computation for

any unrelated business income (as deﬁned in IRC Section 513)

Unrelated Business Income

and should ﬁle a Form IT-41. Income from bingo events; rafﬂes;

Under the Adjusted Gross Income Tax Act, the Department

door prizes; charity game nights; festival events; and the sale of

recognizes the method of accounting used for federal income tax

pull tabs, punchboards, and tip boards are considered unrelated

purposes. If income is received from activity outside Indiana that

business income unless the organization uses completely

is subject to tax in another state, the three-factor apportionment

volunteer labor and is properly registered with the Indiana

formula must be used. Enclose the completed Schedule E,

Gaming Commission to conduct such activities.

Apportionment of Income, with the return.

The organization may have income from the sources enumerated

Note: Round all entries to the nearest whole dollar amount. Do

on IT-20NP schedules that is not subject to tax as unrelated

not use a comma in dollar amounts of four digits or more. For

business income. To be subject to tax, the income must be from

example, instead of entering “3,455” you should enter “3455. ”

Form It-20np - Nonprofit Organization Unrelated Business Income Tax Booklet - 2012 Page 7

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