IRS Proposes Grouping Of Nonprofits' Taxable Biz Income

IRS Proposes Grouping Of Nonprofits' Taxable Biz Income

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David L. Thompson, vice president of public policy for the National Council of Nonprofits, told Law360 Thursday that the proposed rules were the “least bad option for implementing a very bad law” since the Tax Cuts and Jobs Act required nonprofits to calculate each trade or business separately and pay taxes on each separate business line. Before the 2017 tax law was implemented, nonprofits were treated the same as for-profit businesses: Revenues and expenses could be aggregated and taxes paid on the excess amount, he said.

The proposed rules let nonprofits group unrelated business income into 20 silos, which is helpful because previously businesses would have had to break down income into dozens or hundreds of separate categories, Thompson said.

“So, the proposed rules are better than before, but the law itself is the mistake that Congress must correct by repealing” Section 512(a)(6), he said.

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Law360
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