Andy is, as usual right on the legalities.  However, it's important to
remember that UBIT is levied on profits - not gross income.  Most
organizations figure out that if they account for ALL their expenses in a
rental program, the real profits are pretty small.  Also, several have
gotten IRS opinions that this is a passive revenue sources and therefore
not subject to UBIT.  In my experience, the issues of collections safety
and diversion of employee time and attention from their professional
responsibilities are far more relevant than UBIT.  Contact the function
managers group in Boston for details - start with the functions managers at
the New England Aquarium in Boston or Peabody Essex Museum in Salem.  Good
luck.

Laura Roberts


At 05:17 PM 2/7/97 -0500, you wrote:
>Rental of facilities for weddings probably generates unrelated business
>income. Rental income is exempt from Unrelated Business Income Tax (UBIT)
>unless the rental includes services (such as set-up, or maid service, or
>catering).  If it includes such services, it may be taxable income.
>
>(In order to be taxable, income must be from a business, the business
>must be "regularly carried on," and it must be unrelated to mission.
>Even if it meets these tests, income may still escape UBIT if the
>activity is principally carried on by volunteers.)
>
>Many museum professionals believe that as long as they keep the galleries
>open and perhaps provide docents, the rental is mission-related (and
>therefore exempt from UBIT).  Based on various recent pronouncements, I
>think that this line would not find much favor at the IRS.  IRS would
>probably say, look, a party is a party is a party, the attendees are there
>for the party, and the fact that incidentally they also get some
>educational experience is not really relevant.  These pronouncements
>applied only to individual institutions, but they are a fair indication
>of what to expect if the IRS looks at *you.*
>
>Andy Finch
>[log in to unmask]
>AAM Government Affairs
>
>usual disclaimers apply
>
>