IRS TE/GE advisory committee’s report - UBTI issues, recommendations for colleges, universities 

June 12:  A report, issued yesterday by an IRS advisory committee, makes recommendations concerning unrelated business taxable income (UBTI) issues and compliance for colleges and universities.


The recommendations in the June 11 report from the Advisory Committee on Tax Exempt and Government Entities (ACT) are based in part on a review of the 2013 IRS compliance project for colleges and universities and on the ACT’s own study of the UBTI issues. The report recommends the following future guidance:

  • Regulations providing that profits from a substantial commercial activity will not preclude exemption under section 501(c)(3) as long as the organization’s income and financial resources are used commensurate in scope with its charitable program
  • Formal guidance to be issued to IRS field employees regarding the proper methods for allocating indirect costs when facilities and/or personnel are used to carry on exempt activities and to conduct unrelated trade or business
  • A revenue ruling on UBTI issues, including provisions addressing: categories of activities that will be considered related and unrelated; preparatory time spent on activities; scenarios of situations involving activities frequently reported on the college and university questionnaire (e.g., facility rentals and dual-use properties)
  • A new Form 990-T that will be web-based, and that will use activity-by-activity reporting by means of a checklist that would not be open to public disclosure, but that would include links to education and outreach materials, activity-specific worksheets with step-by-step processes for calculating revenues and expenses, and flow-through to a new, streamlined Form 990-T

Read text of the 357-page ACT report [PDF 5.23 MB]

For more information, contact:

Rick Speizman, Partner-in-Charge of KPMG's Washington National Tax Exempt Organizations Tax group

+1 (202) 533-3084

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