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The Control Question for Nonprofit Joint Ventures: What is Enough?

Has your nonprofit ever engaged in joint activities with a business, perhaps with resulting revenues?  Such arrangements are increasingly common for many Section 501(c)(3) organizations. A key legal requirement is that the tax-exempt organization maintain control of the project, so that its charitable resources will be “exclusively” used in furtherance of tax-exempt purposes, as required by the Internal Revenue Code.  What does “control” mean for IRS purposes, and what happens to resulting revenues? Careful planning is essential to answering these questions for optimal tax compliance.

IRS Notice 2018-67: Interim Guidance on Unrelated Business Taxable Income “Silos”

Does your nonprofit owe income tax on multiple “silos” of unrelated business taxable income (UBTI)?  This has been a difficult question for many tax-exempt organizations to answer due to the lack of guidance on what constitutes one unrelated trade or business, or one “silo.”  On August 21, 2018, the Internal Revenue Service (“IRS”) issued Notice 2018-67 (“Notice”), providing interim guidance, and greatly needed clarity, on how to identify separate trades or businesses in connection with unrelated business income tax (“UBIT”) liability.  This article provides six of the most notable take-aways from Notice 2018-67. 

The Changing Landscape of Unrelated Business Income Tax

The Tax Cuts and Jobs Act significantly altered our Tax Code, affecting individuals, for-profit organizations, and nonprofit organizations alike. This article discusses particular changes under the Act specific to unrelated business taxable income (“UBTI”). The new legislation provides that UBTI from each unrelated business must now be calculated separately, a requirement which is increasingly known as “siloing”. 

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