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Final regulations released to Federal Register: Separately computed UBTI

Separately computed UBTI

The U.S. Treasury Department and IRS this afternoon released for publication in the Federal Register final regulations (T.D. 9933) concerning exempt organizations with more than one unrelated trade or business and specifically on the calculation of unrelated business taxable income (UBTI).

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Under changes made by the 2017 tax law,* a tax-exempt organization must separately calculate the net UBTI of each unrelated trade or business. Any loss derived from one unrelated trade or business may not be used to offset income from another unrelated trade or business, and net operating loss (NOL) deductions are allowed only with respect to the trade or business from which the loss arose.

*Pub. L. No. 115-97, often referred to as the “Tax Cuts and Jobs Act” (TCJA).

 

Read the final regulations [PDF 385 KB] (33 pages as published in the Federal Register on December 2, 2020)

The IRS on November 19, 2020, posted a version of these final regulations on its website, with the following statement:

This document has been submitted to the Office of the Federal Register (OFR) for publication and will be pending placement on public display at the OFR and publication in the Federal Register. The version of the final rule released today may vary slightly from the published document if minor editorial changes are made during the OFR review process. The document published in the Federal Register will be the official document.

Read a computer-generated document [PDF 1 MB] that provides a comparison of the version of the final regulations submitted this afternoon for publication in the Federal Register against the version posted by the IRS on November 19, 2020. This is an unofficial document produced by KPMG for the purpose of showing what changes, if any, were made to the regulations prior to being released to the Federal Register for publication. It has not been reviewed for accuracy.

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The final regulations provide little transition time for organizations to evaluate the final regulations and to design and implement accounting methods and systems to capture revenue and expenses, including allocations among unrelated trades or businesses. The final regulations are effective the first tax year beginning after publication in the Federal Register, which for calendar year organizations, is January 1, 2021.


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

The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organization. KPMG International Limited is a private English company limited by guarantee and does not provide services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.

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