IRS, Treasury Issue Guidance for Applying UBTI "Silo" Rules for Tax-Exempt Organizations

April 24, 2020

The Treasury Department and IRS recently issued proposed regulations under the Tax Cuts and Jobs Act (TCJA) providing guidance on calculating unrelated business taxable income (UBTI) for tax-exempt organizations subject to the unrelated business income tax with more than one unrelated trade or business.

The proposed regulations provide guidance on identifying separate trades or businesses, including investment activities, as well as certain other amounts included in UBTI.

Changes under the TCJA require tax-exempt organizations subject to the UBTI tax to compute UBTI, including any NOL deduction, separately for each trade or business (referred to as a "silo"). Under prior law, UBTI was the gross income of all unrelated trades or businesses less the allowed deductions from all unrelated trades or businesses. Starting in the tax year beginning after Dec. 31, 2017, the loss from one trade or business may not offset the income from another separate trade or business.

The public comment period on the proposed regulations closes June 23, 2020. View the proposed regulations here.