ISSUE

A few weeks ago we reported on the IRS’ omission of “Guidance under §512 regarding methods of allocating expenses relating to dual use facilities.”  More on that issue from the IRS.

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SITUATION

Troas Bible College (TBC) is a private college exempt under Internal Revenue Code section 501(c)(3) and 170(b)(1)(A)(ii).  They are required to file Form 990 annually.

We talked to Troas’ Accounting Team via video meeting and they asked us about a recent “Tax Tips” where we asked if the IRS was out of bounds for dropping the important project regarding methods of allocating expenses relating to dual use facilities.  “That just seems wrong,” one of the TBC team states.

“Well,” we answer, “there are some new developments on that front.  The Treasury Department has recently been quoted as confirming that the ‘dual use expense allocation project’ is being rolled into the project on I.R.C. Section 512(a)(6) – ‘UBIT silo-ing.’”

“Okay,” that makes us feel better.

“They clarify that, now, we not only have to allocate expenses between related and unrelated activities but also between any unrelated activities carried on by our institutions.”

“With regard to the timing of the 512(a)(6) project, the Treasury official stated, ‘The project has been determined to be significant by the Office of Regulatory Affairs, OIRA, so that means that they’ll go through an additional review process before getting published. We are pretty far along. We’re hoping to get that out soon, even though I hate this word soon.’”

 

RULES

From a recent presentation by an Attorney-Advisor, Treasury Office of Tax Legislative Counsel:

“The PGP changes each year so certain things that we do get knocked off and new ones get added. One of the things that was taken off was a project that we were working on dealing with allocation of expenses for unrelated business income and related activities. If you have a facility that does unrelated activities and related activities, how do you allocate the fixed expenses between the unrelated and the related?

That project is now part of the section 512(a)(6) project on UBIT silo-ing. Now, not only are you having to allocate your expenses between your related and your unrelated activities, you also have to allocate your expenses between your different unrelateds if you’re using that same facility. That will be part of that project.”

 

From IRS Priority Guidance Plans (2014-2015 through 2018-2019):

“Guidance under §512 regarding methods of allocating expenses relating to dual use facilities.”

 

BOTTOM LINE

  • We noted a few weeks ago the omission from the new Priority Guidance Plan of the “dual use allocations” provision.
  • It has been clarified that we have an almost three dimensional allocation equation before us: allocating between related and unrelated activities and then allocating the unrelated portion between multiple “silo-ed” activities.
  • The original guidance for “UBIT silo-ing” came in the form of Notice 2018-67. It is 36 pages long.
  • On the “UBIT Silo-ing” project, the quoted Treasury official went on to say, “We are pretty far along. We’re hoping to get that out soon, even though I hate this word soon.

 

Specific questions? Email Dave Moja

The information provided herein presents general information and should not be relied on as accounting, tax, or legal advice when analyzing and resolving a specific tax issue. If you have specific questions regarding a particular fact situation, please consult with competent accounting, tax, and/or legal counsel about the facts and laws that apply.

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