Recent interim guidance on UBIT “Silo-ing” under I.R.C. Section 512(a)(6) contains some interesting provisions with respect to our ongoing discussion on “imputed income” from parking and other fringe benefits.  It may affect your institution.



Denali Christian College (DCC) 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.

DCC’s CFO has been following the “silo-ing” issue closely as their institution has several unrelated business activities.  He calls to ask whether or not our much-discussed (and still unresolved) UBIT and Parking “activity” would be a separate, additional “silo” or business activity for purposes on Internal Revenue Code Section 512(a)(6).

The short answer is no.  Last week, the IRS issued Notice 2018-67 which set forth initial guidance on the UBIT “silos” issue – including the permissible use of NAICS 6-digit codes for identifying separate business activities (more on that in future “Tax Tips”) – and gave us some insight into the treatment of the imputed income from various fringe benefits.



From IRS Notice 2018-67:

Section 512(a)(7) increases UBTI by any amount for which a deduction is not allowable under this chapter by reason of Section 274 and which is paid or incurred by such exempt organization for any qualified transportation fringe (as defined in Section 132(f)), any parking facility used in connection with qualified parking (as defined in Section 132(f)(5)(C)), or any on-premises athletic facility (as defined in Section 132(j)(4)(B)). However, Section 512(a)(7) does not apply to the extent the amount paid or incurred is directly connected with an unrelated trade or business that is regularly carried on by the organization. Unlike other paragraphs of Section 512, Section 512(a)(7) does not treat amounts included in UBTI as a result of that section as an item of gross income derived from an unrelated trade or business (see section 4 of this notice). Furthermore, the Treasury Department and the IRS do not believe that the provision of the fringe benefits described in Section 512(a)(7) is an unrelated trade or business. Accordingly, any amount included in UBTI under Section 512(a)(7) is not subject to Section 512(a)(6). (Underline added.)



  • The IRS is suggesting that institutions may utilize the NAICS 6-digit code regime for identifying “silos” of unrelated business activities for purposes of I.R.C. Section 512(a)(6).
  • The NAICS codes are set forth in a 93 page publication. There are more than 1,000 6-digit NAICS codes.
  • The imputed income for parking and other fringe benefits, from I.R.C. Section 512(a)(7), is not subject to the provisions of I.R.C. Section 512(a)(6).
  • Does this mean that any and all losses from unrelated business activities might be offset against any imputed income from I.R.C. Section 512(a)(7)?

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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