Tax-exempt Organizations Need More Time to Comply with New Computation Requirement, AICPA Advises Treasury Department and Congress

May 24, 2018

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A delay is needed for the effective date of the provision in the Tax Cuts and Jobs Act (TCJA) that requires separate computation of unrelated business taxable income (UBTI) for each trade or business of a tax-exempt organization, the American Institute of CPAs (AICPA) has advised Congress and the U.S. Department of the Treasury.  The effective date set by the TCJA for the change is generally for tax years beginning after December 31, 2017.

Annette Nellen, CPA, CGMA, Esq.,  chair of the AICPA Tax Executive Committee, wrote in similar letters  on April 17 to Congress and the Treasury, “The new computation requirement of section 512(a)(6) represents a significant departure from previous law and, although the effective date of December 31, 2017 has passed, additional guidance is necessary for taxpayers and practitioners to make informed decisions and comply with the new requirement for the 2018 tax year.”

The burden of new section 512(a)(6) on tax-exempt organizations is “substantial and nearly all tax-exempt organizations are affected,” Nellen stated in the letters.

She stated in the letter to Treasury, “There is sufficient authority to implement a delay, and we therefore request that the IRS and Treasury delay the effective date for new section 512(a)(6) until December 31, 2018.  Alternatively, if it is determined that the IRS and Treasury do not have the authority, we request that the IRS and Treasury collaborate with Congress to delay the implementation date.”

A delay in the effective date to December 31, 2018 will allow time for the issuance of guidance and time for taxpayers to comply with the new reporting requirements, Nellen wrote in the letters.