New Rule for Tax-Exempt Not-For-Profit Organizations with Unrelated Business Taxable Income

Posted on 01.05.18

New Rule for Tax-Exempt Not-For-Profit Organizations with Unrelated Business Taxable Income

By John E. Kent, Jr., CPA, Partner | Not-for-Profit team

Unrelated business taxable income is the gross income derived by any tax-exempt organization from any unrelated trade or business regularly carried on by the organization, less allowable deductions. An unrelated trade or business is any trade or business the conduct of which is not substantially related to the exercise or performance by the organization of its exempt purpose.

Under the old law, tax-exempt organizations that have more than one unrelated business or trade, were allowed to consolidate those revenues and expenses. The Tax Cuts and Jobs Act provides that exempt organizations with more than one trade or business will be required to compute their unrelated business income separately with respect to each trade or business. Net operating loss deductions after December 31, 2017, may only offset future unrelated business income with respect to the trade or business for which the loss arose. Prior year net operating losses will be allowed to be carried forward and will not be subject to the new rule.

Please contact our not-for-profit team with any questions you have regarding unrelated business income tax and the new rules. Email | 804.747.000

Additional not-for-profit accounting and tax resources:

The information contained within this article is provided for informational purposes only and is current as of the date published. Online readers are advised not to act upon this information without seeking the service of a professional accountant, as this article is not a substitute for obtaining accounting, tax, or financial advice from a professional accountant.

Posted by: John E. Kent, Jr., CPA

John has more than 25 years of experience in public accounting providing auditing and business consulting services to clients in the retail, manufacturing, construction, and not-for-profit industries. He specializes in benefit plan audits, mergers and acquisitions, business planning, and financing. His experience includes designing and implementing cost accounting and inventory control systems for multi-industry companies, conducting LIFO inventories, and assisting clients with adopting new accounting standards. Read more of John's insights on our blog.