UBI stands for
unrelated business income, which is income that an exempt organization receives from conducting activities that are not related to its exempt purpose. Even if an organization uses the income from an unrelated activity to help pay for its exempt activities, that income is still UBI.
Conducting UBI-generating activities is not necessarily a bad thing. An organization might just have to pay tax on those activities. However, for 501(c)(3)s, if the conduct of UBI-generating activities becomes substantial in comparison with the organization’s exempt-function activities, then the organization’s tax- exempt status could be jeopardized.