Yossi Ziffer and Chris Moran published “IRS Issues New Proposed UBIT ‘SILO’ Regulations for Exempt Organizations” in the July/August edition of Taxation of Exempts. The following is an excerpt:
On 4/23/2020 the IRS released long-awaited proposed regulations providing guidance on how exempt organizations with more than one unrelated trade or business should calculate unrelated business taxable income (UBTI).
Historically, exempt organizations measured their UBTI, and thus determined their unrelated business income tax (UBIT) liability, on an aggregated basis. Section 512(a)(6), added as part of the 2017 Tax Cuts and Jobs Act (TCJA), introduced a new UBIT “silo” concept, requiring exempt organizations with more than one unrelated trade or business to calculate UBTI separately for each trade or business. However, the enactment of Section 512(a)(6) raised many fundamental questions, principally because the 2017 TCJA did not clearly define what constitutes (or does not constitute) a “separate” trade or business, thereby leaving exempt organizations unsure as to how to comply with the new tax concept.