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It is because of fact that there is a provision that tax exempt organizations are associated with unrelated business income. Therefore that organization is tax exempt, but its income from unrelated business is not tax-exempt. For example, a charity center have a pizza. The charity center is a tax-exempt organization and its pizza parlor produces unrelated business income. It make is obvious to have UBIT(unrelated business income tax) provisions apply to tax exempt organizations as charity are tax exempt, but its income from the pizza parlor is not tax-exempt.
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Nov 12th, 2015
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