Wednesday, June 24, 2020

ABA Tax Section submits comments on 512(a)(6) UBIT Siloing

The ABA Tax section just submitted its comments on section 512(a)(6) colloquially known as the UBIT siloing provision.  From the comments:

"These Comments respond to Prop. Treas. Reg. § 1.512(a)(6) (“Proposed Regulations”) issued by the Department of Treasury (“Treasury”) and the Internal Revenue Service (the “Service”) under section 512(a)(6) of the Code.

These Comments supplement our comment letter dated June 21, 20182 (the “June 2018 Comments”) and our comment letter dated
December 4, 20183 (the “December 2018 Comments”). We submitted the June 2018 comments in response to the Second Quarter Update of the Treasury and IRS Priority Guidance Plan4 and the December 2018 comments in response to Notice 2018-67.5 Prior to the enactment of section 512(a)(6) as part of the 2017 tax act6 (the “Act”), exempt organizations were permitted to aggregate their losses and gains from all unrelated business activities in order to report and pay taxes on the net unrelated business taxable income (“UBTI”), if any. New section 512(a)(6), which has colloquially been referred to as the “silo” rule, requires, beginning for tax years starting in 2018, that “[i]n the case of any organization with more than 1 unrelated trade or business . . . unrelated business taxable income, including for purposes of determining any net operating loss deduction, shall be computed separately with respect to each such trade or business.”

In these Comments, we respond to issues addressed in the Proposed Regulations. We summarize our recommendations and comments below; we note that the more detailed discussions of many of the recommendations include examples."

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