Important Changes to Unrelated Business Income Tax for Nonprofits

Like many industries, nonprofit organizations will be affected by the ‘Tax Cuts and Jobs Act’. Nonprofits should expect to see changes to their tax filing requirements for the year 2018. Click here to read a brief overview of the changes that may affect your organization.

January 17, 2018

If your tax-exempt organization has any unrelated business activity, it is important that you review the important changes signed into law on December 22nd to understand the impact on your organization.

New tax law impacting exempt organizations becomes effective for tax years beginning after December 31, 2017.

Under the new law, tax-exempt entities that are subject to tax on their UBTI will be required to segregate their taxable income and loss for each unrelated trade or business activity for purposes of determining their UBIT. Gains and losses have to be calculated and applied separately. The losses generated by one unrelated business activity cannot be used offset the income derived from another activity. However, organizations are allowed to use one year’s losses to reduce taxes on another year’s income from the same activity.

There is a transition rule that permits an entity to carry forward net operating losses that were generated prior to January 1, 2018.

UBIT will be increased for any expenses paid or incurred by a tax exempt entity for qualified transportation benefits, parking facilities and on-premises athletic facilities.

The nonprofits will pay lower rate on UBIT, tax rate is reduced from 35% to 21%.


Please contact us to discuss the changes and the impact on your organization in greater detail.

This information is provided to you in good faith, without legal liability on behalf of Macpage LLC. As always consult with your CPA prior to implementing any suggestions.

For more information on Macpage’s nonprofit services visit www.macpage.com/nonprofit or contact one of our specialists, Peter Montano, PGM@macpage.com or Pat Nicholas, PJN@macpage.com.