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Final regulations: Calculating UBTI of VEBAs, other exempt organizations

Calculating UBTI of VEBAs, other exempt organizations

The U.S. Treasury Department and IRS today released for publication in the Federal Register final regulations (T.D. 9886) providing guidance on how certain organizations that provide employee benefits—including voluntary employee beneficiary associations (VEBAs) under section 501(c)(9), supplemental unemployment benefit trusts (SUBs) under 501(c)(17), social and recreational clubs under section 501(c)(7), and section 501(c)(2) title holding corporations that have income payable to the listed organizations—are to calculate their unrelated business taxable income (UBTI).

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With today’s release, regulations that were proposed in 2014 are finalized and corresponding temporary regulations are removed. Read the final regulations [PDF 308 KB]

The preamble to the final regulations explains that Treasury and the IRS considered comments received in response to the 2014 proposed regulations, and that the final regulations adopt the provisions of the 2014 proposed regulations “with no modifications” other than the following changes:

  • A change in the applicability date to tax years beginning on or after the date of publication of these final regulations
  • A modification of the definition of covered entity to include certain corporations described in section 501(c)(2), as provided in section 512(a)(3)(C)
  • The addition of a clause that refers to the provision in section 512(a)(3)(D) addressing nonrecognition of gain in the case of sales of certain property
  • Minor updates to the examples, formatting changes, and other minor changes in wording that are described as “nonsubstantive” 

The final regulations were published in the Federal Register on Tuesday, December 10, 2019.

 

For more information, contact a tax professional with KPMG’s Washington National Tax practice:

Ruth Madrigal | +1 202 533 8817 | ruthmadrigal@kpmg.com

Preston Quesenberry | +1 202 533 3985 | pquesenberry@kpmg.com

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