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”. 

State Sales Tax Liability in Wayfair’s Wake

Are nonprofits that sell goods liable for state sales tax, like for-profit businesses? And does the answer change if sales are made via the Internet? Nonprofits may indeed owe state sales tax for their sales, depending on their specific activities and extent of available state nonprofit exemptions. In the wake of the U.S. Supreme Court’s June 2018 South Dakota v. Wayfair, Inc. decision, such liability may include online sales – for both businesses and nonprofits. This is huge news for giant retailers like Wayfair and Amazon, but what does it mean for nonprofit sellers?