Hope Through Loans: Is That Charitable?

May a nonprofit that makes loans to private individuals and businesses qualify as a Section 501(c)(3) organization? Or is making a loan a “business,” not suitable for public charity status? In the world of microfinance—making small loans to those who lack ready access to funds— the IRS allows for such public charity qualification, albeit within restrictive parameters. Charitable microfinance activities are well grounded in historical practice, they can provide significant societal benefits to disadvantaged communities, and thus they can fulfill tax requirements for “charity.”

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”.