Sorting out whether a nonprofit has unrelated business income and whether they need to pay unrelated business income tax can be daunting. The general public often assumes that nonprofit organizations pay no taxes. In reality, tens of thousands of nonprofits report billions in taxable income and hundreds of millions in unrelated business income tax annually. While many nonprofit organizations don’t have unrelated business taxable income after subtracting deductions, it is important to do a thorough evaluation. An unexpected unrelated business income tax can be a major expense.