IRS wants comments on unrelated business income taxes

The Internal Revenue Service has issued a notice soliciting comments on how to apply a new section of the tax code that was added by the Tax Cuts and Jobs Act pertaining to the unrelated business income taxes for otherwise tax-exempt organizations.

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The unrelated business income tax applies to organizations such as universities for activities that aren’t related to the tax-exempt purpose of the organization, such as a coffee shop on the university campus.

In Notice 2018-67, the IRS noted that Section 512(a)(6) of the tax code requires an organization subject to the unrelated business income tax with more than one unrelated trade or business to calculate unrelated business taxable income separately with respect to each trade or business.

The notice asks for comments on different topics, including possible methods for separating trades or businesses and the treatment of activities in the nature of investments and income from fringe benefits required to be included in unrelated business taxable income.

The notice also provides interim and transition rules for aggregating gross income and directly connected deductions of certain activities in the nature of investments.