New Guidance on Calculating UBTI for Separate Trades or Businesses Under Tax Reform

What Constitutes Unrelated Separate Lines of Businesses, Using Silos to Compute UBTI, Anti-Netting Provisions

A live 110-minute CPE webinar with interactive Q&A


Thursday, November 29, 2018

1:00pm-2:50pm EST, 10:00am-11:50am PST

or call 1-800-926-7926

This webinar will provide tax advisers and exempt org personnel with a critical first look at the new IRS guidance on identifying separate lines of trade or businesses for purposes of calculating unrelated business taxable income (UBTI) as is now required by the TCJA tax reform law. The panel will detail the specifics of siloing separate lines of business, describe the impact of new rules governing net operating loss carryforwards, and discuss how to apply the new guidance in calculating UBTI and its required tax. The webinar assumes the attendee is already at least conversant with the standards and guidelines for determining whether income is UBTI and thus subject to tax.

Description

On Aug. 21, 2018, the IRS released Notice 2018-67 which provides preliminary guidance to tax-exempt organizations on calculating UBTI for separate lines of business as now required by the 2017 tax reform law. The Notice provides some preliminary answers, as well as certain safe harbors, for calculating UBTI across multiple trades or businesses.

Perhaps the most significant challenge tax reform presents to tax-exempt entities is Section 512(a)(6), which changes the way nonprofits calculate their UBTI in cases where the organization engages in multiple lines of business. The new law disallows netting of aggregate income and deductions from multiple unrelated trades or businesses, requiring the exempt org to separately calculate UBTI for each individual trade or business. Tax-exempt entities may no longer use losses from one trade or business to offset income from another but must create “silos” for UBTI computations.

While the guidance leaves many questions still unanswered, the Service uses the Notice to telegraph its thoughts for proposed regulations while seeking practitioner comment and allows organizations to use a “reasonable, good faith standard” to calculate UBTI across silos. The Notice provides a glimpse of the Service’s likely approach to identifying what constitutes a separate trade or business, as well as how it will treat income from partnerships and passive investments.

Listen as our experienced panel provides a critical first look at the new IRS transitional guidance to calculating UBTI under Section 512(a)(6).

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Outline

  1. Section 512(a)(6) provisions
  2. Proposed regs concepts on identifying separate and unrelated lines of business using NAICS codes
  3. “Siloing” to comply with prohibitions against netting losses and income from unrelated trades held by nonprofits
  4. Permissible aggregation
  5. Transitional safe harbors
  6. Items open for practitioner comment

Benefits

The panel will discuss these and other high priority topics:

  • Using NAICS codes to identify separate, unrelated trades or businesses
  • What the Notice says about the Service’s thoughts on the treatment of partnership income, and of income derived from passive investments
  • What safe harbor may exempt org advisers and compliance professionals use to avoid additional tax and penalties?

Faculty

Funk, William
William M. Funk

Atty
Law Office of William M. Funk

Mr. Funk focuses his practice on tax law, with extensive experience in tax planning and dispute work. He...  |  Read More

Mills, Elizabeth
Elizabeth M. Mills
Shareholder
Elizabeth M. Mills

Ms. Mills’ practice is focused both on healthcare organizations and tax exemption issues for not-for-profit...  |  Read More

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