IRS Announces Guidance for “Siloing” Separate Unrelated Businesses
One of the more significant changes made by the Tax Cuts and Jobs Act of 2017 was to require tax-exempt organizations to separately calculate unrelated business income tax for each unrelated trade or business. Instead of offsetting all losses from all income attributable to all unrelated trade or business activities, organizations are now required to “silo” each trade and business and calculate unrelated business income tax for each. The statutory text of the Act was silent about how to determine if an organization has more than one unrelated trade or business or how to identify separate trades or businesses. The IRS previously issued guidance that allowed organizations to consider “all the facts and circumstances” in determining if it had multiple or separate trades or businesses. This standard was vague and not very helpful to organizations seeking concrete guidance on making these determinations.
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