Structuring Foreign UBTI Blocker Corporations for Exempt Orgs: Offshore Blockers to Hold Alternative Investments

Nonprofit Entities Owning Private Equity, Hedge Funds and Offshore Funds

Recording of a 90-minute premium CLE/CPE webinar with Q&A

Conducted on Tuesday, December 19, 2017

Recorded event now available

or call 1-800-926-7926
Program Materials

This CLE/CPE webinar will provide tax counsel with a practical guide to structuring foreign blocker corporations for U.S. tax exempt organizations. The panel will outline the benefits and potential risks to tax exempt organizations (TEOs) of investing in foreign “blocker” corporations to block UBTI. The webinar will also outline the required U.S. federal income tax filings for a foreign “blocker” corporation.


U.S. TEOs holding “alternate” investments in private equity or hedge funds must navigate the UBTI rules to avoid unpleasant tax consequences. Those rules generally require TEOs to report and pay tax on all income characterized as UBTI, and excessive UBTI can jeopardize the exempt status of a nonprofit organization.

One strategy utilized by both public charity and private foundations TEOs is setting up a foreign “blocker” corporation to hold UBTI- generating assets.

Structured properly, investing through a blocker corporation may enable a TEO to increase its overall after-tax return from an investment, including by recharacterizing debt-financed income (otherwise subject to tax as UBTI) as passive income exempt from tax . Prior to being distributed to the TEO, however, such income may still be subject to tax (imposed at the blocker entity level) in the blocker corporation’s country of domicile.

The strategy can be complicated and subject to IRS scrutiny. Tax counsel for investment funds and nonprofit organizations must understand the potential risks of investing in a foreign blocker corporation to block UBTI.

Listen as our panel of experienced nonprofit tax advisers provides a deep dive into the rules and reporting requirements governing UBTI for exempt organizations.



  1. UBTI and UBIT impact of private equity, hedge fund and offshore funds
  2. Blocker corporation
  3. Foreign vs. domestic structuring considerations
  4. Assets to hold in blocker corporations and capitalization issues
  5. Required filings
  6. Tax and operational risks


The panel will review these and other key issues:

  • Assessing the tax impacts of investing in blocker corporations for exempt organizations
  • Assets typically held by a foreign blocker corporation to minimize UBIT for an exempt organization parent
  • Distinguishing circumstances in which domestic blocker corporations are typically used
  • Audit and operational risks in using foreign blockers held by exempt organizations
  • U.S. federal income tax reporting requirements for exempt organizations parent of foreign blocker


Lombardo, Marguerite
Marguerite R. Lombardo

Senior Counsel
Proskauer Rose

Ms. Lombardo is a member of the firm's Tax Department and a member of the Private Investment Funds Group. Her...  |  Read More

Brian D. Huber
Brian D. Huber

Senior Counsel
Proskauer Rose

Mr. Huber's primary focus is tax planning for a broad range of private fund clients. He advises private equity fund...  |  Read More

Other Formats
— Anytime, Anywhere

Strafford will process CLE credit for one person on each recording. All formats include program handouts. To find out which recorded format will provide the best CLE option, select your state:

CLE On-Demand Video



CPE Not Available