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Megan C
Megan C, Certified Public Accountant (CPA)
Category: Finance
Satisfied Customers: 16580
Experience:  Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
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Does a church have to pay UBIT when we receive income to rent

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Does a church have to pay UBIT when we receive income to rent our church space ie classrooms, sanctuary and meeting rooms and parking lot spaces to outside groups?

Megan C :

Rental income is excluded from taxation under Code Section 512(b), unless the rental income is derived from Debt-Financed Property (as defined in Code Section 514) that is subject to outstanding Acquisition Indebtedness incurred in acquiring or improving the property. If a congregation is debt free, none of its rental income could be derived from DFP subject to AI, since there obviously is no outstanding debt. Therefore, a congregation that is debt free will not incur any liability for UBIT with respect to its rental income.

Megan C :

So, if your church has debt, there is UBIT, and where the congregation is debt free there is no UBIT

Megan C :

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