Maybe. The use of the income is irrelevant to the analysis. Unrelated business income tax (“UBIT”) arises when the income comes from a trade or business that is regularly carried on and is unrelated to the purpose for which the organization is exempt. This would be a trade or business regularly carried on. (See Ready Reference Page: “Charities Often Worry About UBIT”)This rental does not sound like the use of a museum for parties, where the educational mission of the museum can be furthered by having the participants view the collections and one can argue that bringing more people to the shows is part of its educational mission.  Unless each party includes basketball instruction, it sounds unrelated to the charitable purpose.

Normally rental income from real property, even if it is unrelated to the charitable purpose, is not subject to UBIT. Therefore, the first question is whether this is actually real property rental, even though the “term” of the sublet is only for a couple of hours.  The IRS ruled in a 1969 Revenue Ruling that payment for permission to use facilities “for a single afternoon or evening” constitutes rental income.  But even rental income is subject to UBIT if it comes from “debt financed property” subject to “acquisition indebtedness,” or if the landlord provides significant non-real estate services in connection with the rental.  If the organization had to borrow funds to refurbish the gym, it may be subject to acquisition indebtedness. Or if the organization provides services beyond heat, light or janitorial cleanup — services such as catering, games, or party hosts — the income may also be subject to tax.