Unrelated Business Income Tax

The Tax Cuts and Jobs Act of 2017 increased the unrelated business income tax (UBIT) liability for many tax-exempt organizations by imposing a tax on the cost of providing certain employee benefits such as parking, transportation and fitness facilities, and by changing how unrelated business taxable income is calculated across different business activities. While these changes may seem minor for some, the change and the potential costs for tax-exempt employers could have a significant impact on the finances of many tax-exempt organizations, including foundations. The entire nonprofit industry has expressed serious concerns about the application and enforcement of these new rules. This session will review the new provisions, explain Congress’ reasoning behind the rules, discuss how the rules are currently being implemented and enforced, and explain any changes that have occurred since the effective date of January 1, 2018. The session will also look at how the Philanthropic Enterprise Act of 2017, signed into law on February 9, 2018, has opened the door for more philanthropic businesses.