On November 19, 2020, Chris Moran was quoted in Bloomberg Tax on regulations from the IRS that trigger tax compliance concerns for small nonprofit organizations.
According to the article, the final rules released on November 19 retain a proposed method of grouping income streams together, something most commenters supported. The rules implement a 2017 tax law requirement that nonprofits separately report each stream of taxable income that is unrelated to their core purpose, rather than lumping together income from various sources such as sports tickets, rental property, and corporate partnerships. But the IRS declined requests to continue allowing exempt organizations to aggregate partnership interest as of August 21, 2018 as a separate unrelated business.
The final rules could take effect as soon as January 1, 2021, adding to the pressure on major organizations with lots of income streams. That will be an issue for larger nonprofits with sizable investments, according to Moran. “It’s going to be difficult for them to figure out what’s unrelated business income from these underlying investments and how to report that,” he said.
Moran added that there is a decent chance larger organizations like colleges, hospitals, and private foundations will band together to litigate the issue.