Generating alternative revenue streams starts by generating ideas
— Photo by Conny – Own work (Technical support via Wikimedia Deutschland.), CC BY-SA 3.0,

Alternative revenue streams for higher education institutions are gaining momentum. How can your institution grab hold of this opportunity?

First, take heed:  “Which of you, wishing to build a tower, does not first sit down and count the cost to see if he has the resources to complete it?”  (Luke 14:28).

Below is a brief guide to wise planning procedures to help bring your revenue enhancing ideas to victory.

Alternative Revenue Streams and IRS Considerations

You may want to ensure that the IRS will not tax your alternative income stream. To do this, learn about the unrelated business income tax (UBIT), and ensure you remain in compliance. Here is a brief overview:

IRS Publication 598, Tax on Unrelated Business Income of Exempt Organizations, states:

An exempt organization isn’t taxed on its income from an activity substantially related to the charitable, educational, or other purpose that is the basis for the organization’s exemption. Such income is exempt even if the activity is a trade or business.

However, if an exempt organization regularly carries on a trade or business not substantially related to its exempt purpose, except that it provides funds to carry out that purpose, the organization is subject to tax on its income from that unrelated trade or business.

Keeping the UBIT rules in mind, we recommend taking the following two-phase approach to revenue enhancement opportunity projects.

Phase One: Brainstorming Alternative Revenue Streams

In the Lean Six Sigma philosophy of improvement, brainstorming is viewed as a technique to “elicit a large number of ideas from a group using their collective thinking power.” The following tips will help you maximize your brainstorming session:

  • Allot enough time. We recommend devoting a full day to this process.
  • Involve as many of your institution’s leaders as possible. This should include the CEO, COO, CFO, accounting team, board members, deans, key employees, development officers, athletic directors, and other key employees. Everyone will bring diverse ideas to the table. And many participants are surprised at how fun this process can be!
  • Select a brainstorming session facilitator. The facilitator’s job is to keep the discussion focused, limit distractions, and encourage the continual flow of ideas. The facilitator should also record the myriad of ideas raised during the session.
  • Set simple ground rules. Here are the ground rules we follow when working with clients on revenue enhancement opportunity ideas:
    • All ideas are valid, although all may not be equal.
    • Always take a collaborative viewpoint.
    • Do not criticize the ideas of others, whether verbally or by gesture.
    • Do not hesitate to suggest an idea because it sounds silly. Many times, “silly” ideas can lead to a great idea.
    • Do not allow the group to be dominated by one or two people.
    • Do not let the brainstorming session become a gripe session.
    • In accordance with 1 Samuel 17, focus on being difference makers. No defeatists or detractors allowed.

What should a brainstorming session entail? We typically use the following format, with a break every 60 to 80 minutes to allow people to recharge:

  1. Spend 30 to 40 minutes reviewing your institution’s Form 990 (Return of Organization Exempt from Income Tax) and the footnotes to your audited financial statements to identify “uniquenesses” about your institution. Write these down on a large memo board or big sticky notes.
  2. Have participants anonymously answer a few fun polling questions, such as “What is your favorite Scripture?” or “What did you want to be when you grew up?” Write down the answers. This will help everyone see and understand the unique attributes and perspectives within the group.
  3. Brainstorm 30 or so ideas for “wild and crazy” revenue-generating projects. This should be a flexible, informal, and open time. Try to look beyond the typical categories your funding sources usually come from, such as development, facilities, and services. When working with clients, we chart these ideas in four colors, with black for information, blue for strengths or “uniquenesses,” green for positives, and red for negatives.
  4. Narrow the ideas from Step 3 down to two workable ideas that you can develop action plans for. We recommend identifying one “big plan” idea and one that is “just add water” and easy to implement. The “just add water” idea should be something the team can implement within 60 days, such as donor letters or a fundraising event.

Keep the other ideas from Step 3 on file so that you can return to them in the future. These are often long-term or “partnerable” ideas that may be returned to in the future.

Phase Two: Implementation of Alternative Revenue Streams

Now it’s time to develop action plans for your two chosen ideas. Your action plans should include:

  • A project description
  • A project champion (team leader)
  • Team members
  • Point people for various action items
  • Due dates for action items

One of the key elements of this process is the willingness of the group to participate fully in the brainstorming session. We’ve seen clients develop exciting and revolutionary big plans to enhance their funding and, ultimately, achievement of their mission.

Alternative lines of income can be important for almost all higher education institution. Just keep in mind that while it’s vital to be as creative as possible, it’s important to be aware of potential challenges and issues that can arise, including UBIT.

CapinCrouse can help guide you through the brainstorming process and address any potential UBIT issues. Please contact us at [email protected] to learn more about how we can assist your institution.


  • David Moja

    Dave serves as Partner and Professional Practice Leader – Tax at CapinCrouse. He is dedicated to meeting client needs in the exempt organization tax arena through review of client returns, consulting engagements, training, and the compilation of the annual CapinCrouse Higher Education Tax Reporting Trends Project. He has 29 years of accounting experience and serves several industry committees, including the AICPA Not For Profit Advisory Council. Dave has also served on the IRS Advisory Committee on Tax Exempt and Government Entities (ACT).

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