(Tax Reform) Changes to Unrelated Business Income Tax (UBI)
2017 Tax Cuts and Jobs Act
As part of Tax Reform, UBI must be calculated separately (i.e., expenses of one unrelated trade or business cannot offset income of another trade or business) starting in fiscal year 2019 (July 1, 2018 – June 30, 2019). This change means that all profitable UBI activities will generate a tax liability, which will be taxed at the rate of 21 percent.
It is very important that anyone generating UBI should account for all expenses related to the UBI to reduce any potential liability. For allowable deductions to qualify in computing UBIT, the expenses, deprecation, and similar items must be allowable income tax deductions.
If you think your department might be generating UBI or for more information on UBI, please contact the Auxiliary Office or see IRS Publication 598, Tax or Unrelated Business Income of Exempt Organizations.
01/31/2021: reviewed content
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