The 2019-2020 Priority Guidance Plan is out.  Inexplicably, the IRS has dropped an important project off of the list with no explanation.  Given that it’s football season, should somebody throw a yellow flag?



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 called us with a protest.

“Hey, you’ve been telling us for years that the IRS was working on giving us guidance on how to allocate expenses in the case of dual use facilities such as renting our football stadium.  Now, I’m looking at the new Priority Guidance Plan and that line item has been omitted.  Unbelievable!  I even searched the pdf and the phrase ‘dual use’ does not appear anywhere in the Plan.”

We answer.  “Yep.  We’ve been expecting guidance with categories of activities that would be considered related and unrelated, guidance on preparatory time spent on activities, and scenarios of frequently encountered situations.  But it’s gone.  No fanfare, no explanation.  They just omitted it.”

“Well, it’s football season, shouldn’t the IRS be penalized for illegal procedure, or maybe unsportsmanlike conduct?”

“(Ha-ha) That would be great.  But, to be fair, there has been some commentary that the guidance may ultimately be imbedded in the upcoming Treasury Regulations on Internal Revenue Code Section 512(a)(6).”

The CFO replies, “That ‘siloing’ foolishness?  What if Congress repeals it?  Then, does this just go away?”

“Who knows.  This is a very important issue and it appears that the IRS is trying to do their interpretation of an episode of ‘The Carbonaro Effect’…”



From the 2014 Report of the ACT (EO), Recommendation #3:

The Exempt Organizations Division should work with Chief Counsel and the Treasury Department to provide formal guidance to the field regarding proper methods for allocating indirect costs where facilities and/ or personnel are used to carry on exempt activities and to conduct unrelated trade or business.

The ruling should provide categories of activities that will be considered related and unrelated, guidance on the use of losses, and scenarios of situations involving the activities frequently reported on the college and university questionnaire, such as facility rentals and dual use properties. The ACT has put forth a proposed revenue ruling.

From the 2014 Report of the ACT (EO), Appendix A:

Situation 2 – Y, a state university, leases its basketball arena to a for-profit entertainment business for a concert sponsored by a for-profit promotional company. In addition to the use of the arena, the Y agrees to provide utilities and security services and will operate the concession stands for the event. The concert does not contribute to the educational activities of the University. Due to the substantial services provide[d] by the University, the rental income from this arrangement results in unrelated business income for the University.

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

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

From IRS Priority Guidance Plan 2019-2020:

POOF!  (It’s gone!)



  • The IRS has been promising for 5 years (through the Priority Guidance Plan) to provide guidance on methods for allocating expenses relating to dual use facilities.
  • The new 2019-2020 Priority Guidance Plan (October 8, 2019) is out and this project has been deleted!
  • Dual-Use, allocated expenses must employ a reasonable methodology and there must be a proximate and primary relationship of the expenses to the business activity.
  • There is still hope that this important guidance will be included in future guidance related to I.R.C. Section 512(a)(6) – “Silo-ing.” But, what if that’s repealed??

Specific questions? Email Dave Moja

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