State Tax Treatment of UBTI for Exempt Organizations: Calculations, Conformance and Apportionment

Navigating States' Partial- or Non-Conformance With Federal Treatment; Multi-State Apportionment Rules

Recording of a 110-minute CPE webinar with Q&A

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Conducted on Tuesday, September 19, 2017

Recorded event now available

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Course Materials

This course will provide nonprofit tax professionals and advisers with a practical guide into various states' rules governing unrelated business income tax (UBIT), which U.S.-based tax-exempt organizations must pay on unrelated business taxable income (UBTI). The webinar will focus on the standards and guidelines for determining whether income is UBTI and thus subject to tax, identify those states that deviate from federal treatment, and list those states whose definitions conform to federal but have different calculation bases.

Description

A significant challenge for exempt organizations is navigating federal and state rules on Unrelated Business Taxable Income (UBTI). The federal rules are often complex even with existing guidance; however, the variances in how states treat UBTI create additional difficulties for advisers to nonprofits. While most states conform to the federal government in both classifying an organization as tax exempt and in defining UBTI, there are numerous deviations from federal treatment.

With very few exceptions, most states impose a state-level tax on UBTI. Many of these states start with the federal definition of UBTI, but make state-specific modifications, generally in the form of required "add-backs." Additionally, many states do not allow exempt entities to carry-back net operating losses; some of these states permit loss carry-forwards for UBTI calculation purposes.

Perhaps the most complicated task for exempt organizations operating in multiple states is apportioning UBTI between the various states in which the nonprofit operates. Many states require exempt entities to use different apportionment formula approaches than they impose on for-profit companies. Advisers to exempt organizations must be able to reconcile various apportionment formulas and recognize where a state requires a specific apportionment requirement for UBTI.

Listen as our panel of experienced nonprofit tax advisers provides a practical guide to navigating multi-state tax treatment of UBTI for exempt organizations.

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Outline

  1. Federal treatment of Unrelated Business Taxable Income (UBTI)
    1. Identifying UBTI
    2. UBTI calculations and schedules
    3. Tax computation
    4. Allocation of expense deductions
  2. State treatment of Unrelated Business Taxable Income
    1. States not conforming with federal exempt org classification
    2. States that tax UBTI
    3. Common States adjustments to federal UBTI calculations
    4. Range of rules for Net Operating Loss carry-backs and carry-forwards
    5. Apportionment Challenges

Benefits

The panel will discuss these and other important topics:

  • What states deviate from federal treatment of UBTI?
  • What states generally conform to federal UBTI calculations but with add-backs?
  • State deviations in NOL carry-back and carry-forward treatment for UBTI
  • Which states require a different formula for apportioning UBTI than the one applicable to for-profit commercial entities

Faculty

Blunt, Brenda
Brenda A. Blunt, CPA, CGMA
Tax Partner
Eide Bailly

Ms. Blunt has nearly 30 years of experience providing services to tax-exempt entities, closely-held business and their...  |  Read More

Dr. Laura Robichaud, DBA, MBA
Dr. Laura Robichaud, DBA, MBA
State and Local Tax Senior Manager
Eide Bailly

Dr. Robichaud is State and Local Tax Senior Manager with the Firm. She has financial and tax experience with extensive...  |  Read More

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