Theater, Inc., an exempt organization, owns a printing company, Printers, Inc., which remits 85% of its profits (i.e., taxable income of $100,000) to Theater, Inc. Since Printers remits at least 85% of its profits to Theater, neither Theater, Inc., nor Printers, Inc., must pay income tax on this $85,000 ($100,000 × 85%).

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Even though Printers, Inc. remits 85% of its profits to Theater, Inc., it is still a for-profit company and subject to income tax on its taxable income of $100,000. Therefore, Printers, Inc. would need to pay income tax on its profits, and Theater, Inc. would need to pay tax on the $85,000 it receives from Printers, Inc. as unrelated business income.