New Rule for Tax-Exempt Not-For-Profit Organizations with Unrelated Business Taxable Income
Posted on 01.05.18
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.
Additional not-for-profit accounting and tax resources:
- Earned Income Ventures: Starting a Social Enterprise
- Upcoming Changes to Not-for-Profit Reporting and Your Organization's Chart of Accounts
- Officers, Directors, and Key Employees-Is your 990, Part Vii Complete?
- Not-for-Profit Blog