UBIT Draws Attention of Congress and IRS

Posted on: August 9, 2012

House lawmakers have begun a series of hearings on an array of nonprofit tax issues, as Congress contemplates tax reform efforts that may unfold after the election cycle. In a hearing on July 25, the IRS, several Ways & Means Committee members, and a nonprofit scholar concluded that the current rules for reporting unrelated business income tax (UBIT) are confusing, and may lead to under-payment of taxes on income. While no specific reform proposals were outlined by the committee members, orchestra and museum sales of merchandise were both mentioned as questionable areas of activity by one witness, a nonprofit scholar from the University of Illinois, who recommended taxing all nonprofit commercial activity, whether or not it is related to the charitable purpose of the organization.

The League will be engaging orchestras on this topic throughout the coming months, and will be asking for your help in identifying areas in which UBIT rules have posed a challenge for your orchestra. In the meantime, please contact Heather Noonan and Stephen Lisner on the League staff with any related questions. Background and resources regarding the current UBIT rules are available on the IRS web site.

Posted August 9, 2012