Page 394

TITLE 26-INTERNAL REVENUE CODE nected with the conduct of a trade or business within the United States" for", the unrelated business tax. able income shall be its unrelated business taxable income derived from sources within the United States determined under subchapter N (sec. 861 and follow- Ing), relating to tax based on income from sources within or without the United States". 1964-Subsec. (b). Pub. L, 88-380 added par. (14). 1958-Subsec. (b)(13). Pub. L. 85-367 added subsec. (b)(13). Erncrvs DATE or 1976 AcmiDimEN Amendment by Pub. L. 94-568 applicable to taxable years beginning after Oct. 20, 1976, see section l(d) of Pub. L. 94-568, set out as an Effective Date of 1976 Amendment note under section 501 of this title. Amendment of subsec. (b)(15) by section 1901(b)(8)(P) of Pub. L. 94-455 applicable with respect to taxable years beginning after Dec. 31, 1976, see sec- tion 1901(d) of Pub. L. 94-455, set out as an Effective Date of 1976 Amendment note under section 2 of this title. Amendment of subsecs. (b)(13) to (17) by section 1951(b)(8)(A) of Pub. L. 94-455, applicable with re- spect to taxable years beginning after Dec. 31, 1976, see section 1951(d) of Pub. L. 94-455, set out as an Ef- fective Date of 1976 Amendment note under section 72 of this title. Section l(b) of Pub. L. 94-396 provided that: "The amendment made by subsection (a) [amending subsec. (b)(5) of this section] shall apply to gain from options which lapse or terminate on or after January 1, 1976, in taxable years ending on or after such date." EFEcTIV DATE OF 1972 AmENM=T Amendment by Pub. L. 92418 applicable to taxable years beginning after Dec. 31, 1969, see section l(c) of Pub. L. 92-418, set out as an Effective Date of 1972 Amendment note under section 501 of this title. EFFECTIVE DATE OF 1969 AMwxDmrrr Amendment by section 121(b)(1), (2) of Pub. L. 91- 172 applicable to taxable years beginning after Dec. 31, 1969, see section 121(g) of Pub. L. 91-172, set out as an Effective Date of 1969 Amendment note under sec- tion 511 of this title. EmcrIrv DATE OF 1966 AMENDMENT Amendment by Pub. L. 89-809 applicable with re- spect to taxable years beginning after Dec. 31, 1966, see section 104(n) of Pub. L. 89-809, set out as an Ef- fective Date of 1966 Amendment note under section 11 of this title. EFYEnzr DATz OF 1964 AM mmrwrr Section 2 of Pub. L. 88-380 provided that: "The amendment made by the first section of this Act [adding to subsec. (b)(14) of this section] shall apply with respect to taxable years beginning after Decem- ber 31, 1963." EFF EVs DATE OF 1958 AmxNsmrE Section 1(b) of Pub. L. 85-367 provided that: "The amendment made by subsection (a) [adding subsec. (b)(13) of this section] shall apply to taxable years of trusts beginning after December 31, 1955". SAVINGS PROVISION Section 1951(b)(8)(B) of Pub. L. P4-455 provided that: "Notwithstanding subparagraph (A) [repealing subsecs. (b)(13), (14) of this section], income received in a taxable year beginning after December 31, 1975, shall be excluded from gross income in determining unrelated business taxable income, if such Income would have been excluded by paragraph (13) or (14) of section 512(b) [subsec. (b) of this section] if received in a taxable year beginning before such date. Any de- ductions directly connected with income excluded under the preceding sentence in determining unrelat- ed business taxable income shall also be excluded for such purpose." CROSS RzaiuFNcEs Limitation on charitable deduction, see section 681 of this titl;. Nonresident aliens and foreign corporations, income taxes of, see section 871 et seq. of this title. Withholding of tax on foreign tax-exempt organiza. tions, see section 1443 of this title. SECTION REnsui TO IN OTm SECTXONS This section is referred to in sections 502, 509, 511, 513, 514, 664, 681, 1443, 4943 of this title. § 513. Unrelated trade or business (a) General rule The term "unrelated trade or business" means, in the case of any organization subject to the tax imposed by section 511, any trade or business the conduct of which is not substan- tially related (aside from the need of such orga- nization for income or funds or the use it makes of the profits derived) to the exercise or perfor- mance by such organization of its charitable, educational, or other purpose or function con- stituting the basis for its exemption under sec- tion 501 (or, in the case of an organization de- scribed in section 511(a)(2)(B), to the exercise or performance of any purpose or function de- scribed in section 501(c)(3)), except that such term does not include any trade or business- (1) in which substantially all the work in carrying on such trade or business is per- formed for the organization without compen- sation; or (2) which is carried on, in the case of an or- ganization described in section 501(c)(3) or in the case of a college or university described in section 511(a)(2)(B), by the organization pri- marily for the convenience of its members, students, patients, officers, or employees, or, in the case of a local association of employees described in section 501(c)(4) organized before May 27, 1969, which is the selling by the orga- nization of items of work-related clothes and equipment and items normally sold through vending machines, through food dispensing facilities, or by snack bars, for the conve- nience of its members at their usual places of employment; or (3) which is the selling of merchandise, sub- stantially all of which has been received by the organization as gifts or contributions. (b) Special rule for trusts The term "unrelated trade or business" means, in the case of- (1) a trust computing its unrelated business taxable income under section 512 for pur- poses of section 681; or (2) a trust described in tiection 401(a), or section 501(c)(17), which is exempt from tax under section 501(a); any trade or business regularly carried on by such trust or by a partnership of which it is a member. (c) Advertising, etc., activities For purposes of this section, the term "trade or business" includes any activity which Is car- ried on for the production of income from the sale of goods or the performance of services. For purposes of the preceding sentence, an ac- § 513 Page 394