Guidance on UBTI Allocations Allows ‘Good Faith’ Interpretations

Guidance on UBTI Allocations Allows ‘Good Faith’ Interpretations

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David L. Thompson of the National Council of Nonprofits called it “unfortunate and troubling” that the IRS didn't delay implementation of section 512(a)(6), which he said unfairly treats nonprofit business activities differently from those of for-profits. 

While reliance on the NAICS code standard is a good start, it isn't a solution, Thompson said.

“Many types of rental income, for instance, would be broken into unworkable groupings that effectively treat the use of the same facilities as multiple ‘trades or businesses’ and, due to accounting and tax costs, discourage facility use,” he said.


An interim rule in the notice permits aggregation of qualifying partnership interests that satisfy either the de minimis test or control test into one trade or business. Also, a transition rule allows for aggregating income within each direct partnership interest acquired before August 21.

That transition rule is the “brightest” part of the notice, and it proves that the IRS and Treasury have the authority to relieve nonprofits of immediate and burdensome tax liabilities, Thompson said.

Source Name: 
Tax Notes
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