26 U.S. Code § 513 - Unrelated trade or business
For purposes of this section, the term “trade or business” includes any activity which is carried on for the production of income from the sale of goods or the performance of services. For purposes of the preceding sentence, an activity does not lose identity as a trade or business merely because it is carried on within a larger aggregate of similar activities or within a larger complex of other endeavors which may, or may not, be related to the exempt purposes of the organization. Where an activity carried on for profit constitutes an unrelated trade or business, no part of such trade or business shall be excluded from such classification merely because it does not result in profit.
The term “unrelated trade or business” does not include qualified public entertainment activities of an organization described in paragraph (2)(C), or qualified convention and trade show activities of an organization described in paragraph (3)(C).
The term “public entertainment activity” means any entertainment or recreational activity of a kind traditionally conducted at fairs or expositions promoting agricultural and educational purposes, including, but not limited to, any activity one of the purposes of which is to attract the public to fairs or expositions or to promote the breeding of animals or the development of products or equipment.
The term “convention and trade show activity” means any activity of a kind traditionally conducted at conventions, annual meetings, or trade shows, including, but not limited to, any activity one of the purposes of which is to attract persons in an industry generally (without regard to membership in the sponsoring organization) as well as members of the public to the show for the purpose of displaying industry products or to stimulate interest in, and demand for, industry products or services, or to educate persons engaged in the industry in the development of new products and services or new rules and regulations affecting the industry.
The term “qualified convention and trade show activity” means a convention and trade show activity carried out by a qualifying organization described in subparagraph (C) in conjunction with an international, national, State, regional, or local convention, annual meeting, or show conducted by an organization described in subparagraph (C) if one of the purposes of such organization in sponsoring the activity is the promotion and stimulation of interest in, and demand for, the products and services of that industry in general or to educate persons in attendance regarding new developments or products and services related to the exempt activities of the organization, and the show is designed to achieve such purpose through the character of the exhibits and the extent of the industry products displayed.
For purposes of this paragraph, the term “qualifying organization” means an organization described in section 501(c)(3), (4), (5), or (6) which regularly conducts as one of its substantial exempt purposes a show which stimulates interest in, and demand for, the products of a particular industry or segment of such industry or which educates persons in attendance regarding new developments or products and services related to the exempt activities of the organization.
The term “unrelated trade or business” does not include any trade or business which consists of conducting bingo games.
In the case of a mutual or cooperative telephone or electric company, the term “unrelated trade or business” does not include engaging in qualified pole rentals (as defined in section 501(c)(12)(D)).
The term “low cost article” means any article which has a cost not in excess of $5 to the organization which distributes such item (or on whose behalf such item is distributed).
If more than 1 item is distributed by or on behalf of an organization to a single distributee in any calendar year, the aggregate of the items so distributed in such calendar year to such distributee shall be treated as 1 article for purposes of subparagraph (A).
The term “unrelated trade or business” does not include the activity of soliciting and receiving qualified sponsorship payments.
The term “qualified sponsorship payment” means any payment made by any person engaged in a trade or business with respect to which there is no arrangement or expectation that such person will receive any substantial return benefit other than the use or acknowledgement of the name or logo (or product lines) of such person’s trade or business in connection with the activities of the organization that receives such payment. Such a use or acknowledgement does not include advertising such person’s products or services (including messages containing qualitative or comparative language, price information, or other indications of savings or value, an endorsement, or an inducement to purchase, sell, or use such products or services).
The term “qualified sponsorship payment” does not include any payment if the amount of such payment is contingent upon the level of attendance at one or more events, broadcast ratings, or other factors indicating the degree of public exposure to one or more events.
The term “unrelated trade or business” includes the provision of debt management plan services (as defined in section 501(q)(4)(B)) by any organization other than an organization which meets the requirements of section 501(q).
For inflation adjustment of certain items in this section, see Revenue Procedures listed in a table under section 1 of this title.
2006—Subsec. (j). Pub. L. 109–280, which directed the addition of subsec. (j) to section 513, without specifying the act to be amended, was executed by making the addition to this section, which is section 513 of the Internal Revenue Code of 1986, to reflect the probable intent of Congress.
1997—Subsec. (i). Pub. L. 105–34 added subsec. (i).
1993—Subsec. (h)(2)(C)(ii). Pub. L. 103–66 substituted “calendar year 1992” for “calendar year 1989”.
1990—Subsec. (h)(2)(C)(ii). Pub. L. 101–508 inserted before period at end “, by substituting ‘calendar year 1987’ for ‘calendar year 1989’ in subparagraph (B) thereof”.
1986—Subsec. (d)(3)(B). Pub. L. 99–514, § 1602(a), inserted “or to educate persons in attendance regarding new developments or products and services related to the exempt activities of the organization”.
Subsec. (d)(3)(C). Pub. L. 99–514, § 1602(b), substituted “section 501(c)(3), (4), (5), or (6)” for “section 501(c)(5) or (6)” and inserted “or which educates persons in attendance regarding new developments or products and services related to the exempt activities of the organization”.
Subsec. (h). Pub. L. 99–514, § 1601(a), added subsec. (h).
1980—Subsec. (g). Pub. L. 96–605 added subsec. (g).
1978—Subsec. (f). Pub. L. 95–502 added subsec. (f).
1976—Subsec. (d). Pub. L. 94–455, § 1305(a), added subsec. (d).
Subsec. (e). Pub. L. 94–455, § 1311(a), added subsec. (e).
Subsec. (c). Pub. L. 91–172, § 121(c), substituted “Advertising, etc., activities” for “Special rule for certain publishing businesses”, in heading, and, in text, substituted provisions extending definition of trade or business to include any activity carried on for the production of income from the sale of goods or the performance of services, for provisions referring to publishing businesses carried on by an organization during a taxable year beginning before Jan. 1, 1953.
1960—Subsec. (b)(2). Pub. L. 86–667 included trusts described in section 501(c)(17).
Amendment by Pub. L. 109–280 applicable to taxable years beginning after Aug. 17, 2006, with transition rule for existing organizations, see section 1220(c) of Pub. L. 109–280, set out as a note under section 501 of this title.