The “Tax Cuts and Jobs Act” includes a well-publicized provision whereby UBTI shall be computed separately for each trade or business.  Our admonition to Treasury is “KISSM” – Keep it Simple, Sir/Madam.



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.  Their CFO called us to ask about the new “silo-ing” provision in Internal Revenue Code Section 512(a)(6) where income or losses from one unrelated “trade or business” may not offset income or losses from another unrelated “trade or business.”

DCC’s CFO asked, “How granular is the IRS going get with this?  Is a summer tennis camp one business activity and a Bible camp another activity?  What about investment income?  How many business activities are they going to concoct from a single K-1? This could be a total debacle!”

“Well, we tell them, it is our sincere hope that the IRS and Treasury do not try to over-complicate the process of defining/delineating ‘trades or businesses’ in this realm.”

A Treasury official said last week at a conference, “It would be incredibly helpful to get comments on how that could be defined.”

“We tell DCC’s CFO this has already been thought through and defined as part of a recommendation by the Advisory Committee on Tax Exempt and Governmental Entities (ACT).  Just send the IRS and/or Treasury a ‘comment’ to look at page 169 of the 2014 Report of the ACT.”



Internal Revenue Code Section 512(a)(6):  Special rule for organization with more than 1 unrelated trade or business.

In the case of any organization with more than 1 unrelated trade or business –

(A) unrelated business taxable income, including for purposes of determining any net operating loss deduction, shall be computed separately with respect to each such trade or business and without regard to subsection (b)(12),

(B) the unrelated business taxable income of such organization shall be the sum of the unrelated business taxable income so computed with respect to each such trade or business, less a specific deduction under subsection (b)(12), and

(C) for purposes of subparagraph (B) , unrelated business taxable income with respect to any such trade or business shall not be less than zero.

From 2014 ACT Report (EO) page 169:

“Then we spoke to several parties about possible, logical line items for Form 990-T (redesign) Part I. These conversations resulted in the expansion of the activities as follows:

  1. Income from unrelated sales of goods
  2. Income from unrelated services
  3. Capital gain income
  4. Income from partnerships and S corporations
  5. Income from real property (including dual-use)
  6. Income from personal property leased with real property
  7. Unrelated debt-financed income
  8. Investment income
  9. Investment income from section 501(c)(7), section 501(c)(9), and section 501(c)(17) organizations
  10. Income from controlled organizations
  11. Exploited exempt activity income (except advertising)
  12. Advertising income
  13. Periodical advertising income
  14. Other income

It should be mentioned that the 2014 House Ways and Means Committee (Republican) Tax Reform proposal includes a codicil that, “Tax-exempt organizations would be required to calculate separately the net unrelated taxable income of each unrelated trade or business.” We believe the proposed lines of Form 990-T (redesign) Part I would facilitate this proposal – if it is voted into law.”

**NOTE: It WAS voted into law and now is I.R.C. Section 512(a)(6).



  • The UBIT “Silo-ing” rules (I.R.C. Section 512(a)(6)) state that, for organizations with more than 1 unrelated trade or business, unrelated business taxable income shall be computed separately with respect to each trade or business.
  • Congress enacted the new I.R.C. Section 512(a)(b) at the end of 2017 as part of the “Tax Cuts and Jobs Act” without much specific guidance.
  • With the IRS and Treasury stretched for resources, they should look to a “just-add-water” solution to the issues of Section 512(a)(6) already recommended by the ACT.
  • If you have comments with regard to 512(a)(6) implementation – or other areas of the TCJA – send those comments to our friends at the U.S. Treasury Department.

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.