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NACUBO submitted comments on behalf of the higher education community to the IRS in response to the April 24 proposed regulations implementing the requirement for institutions to calculate and report unrelated business income by category of activity–the UBIT basketing rules that were enacted as part of the Tax Cuts and Jobs Act.

The June 22 letter, which was endorsed by 10 other higher education associations, addresses the classification of activities and use of the NAICS codes on the Form 990-T as well as acceptable methods for the allocation of expenses between UBI-generating activities and related activities that are not subject to UBIT.

However, the majority of NACUBO’s comments are technical recommendations related to the reporting of investments, with a focus on qualified partnership interests that are subject to a de minimis or a control test to determine that the institution is not in control of the partnership.

NACUBO’s recommendations push back against the proposed 20 percent threshold for the test of whether the institution has no control over a partnership, recommending that if the institution has 50 percent or less ownership interest in a partnership, it will meet the control test when the institution is only participating as a passive investor.

NACUBO also asked the IRS to apply existing look-through rules to directly and indirectly held partnerships.

The IRS is reportedly working to publish as many final rules as possible prior to the federal fiscal year end on September 30.  However, it is unclear when final UBIT basketing rules will be published.


Mary Bachinger

Director, Tax Policy


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