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Final Regulations Issued for Section 512(a)(6)

The IRS has issued final regulations regarding Internal Revenue Code section 512(a)(6). These regulations have been published in the Federal Register and are effective as of December 2, 2020.

Section 512(a)(6) was enacted with the 2017 Tax Cuts and Jobs Act and requires tax-exempt organizations to calculate unrelated business income tax (UBIT) separately for each trade or business. Each trade or business “silo” will be identified using the first two digits of the North American Industry Classification System code (NAICS) and used for a variety of purposes including determining net operating loss (NOL) deductions.

The final regulations treat an exempt organization’s investment activities subject to unrelated business income tax as a separate trade or business for purposes of Sec. 512(a)(6). Qualifying partnership or S corporation interests, and certain debt-financed properties may be treated as separate unrelated trades or businesses for purposes of Sec. 512(a)(6).

The regulations did leave two issues open for further guidance:

  • Allocation of expenses, deprecation and similar items between an exempt activity and unrelated trade or business or between two or more unrelated trades or businesses
  • Application of changes made to Internal Revenue Code section 172 NOL deduction by the Coronavirus Aid, Relief, and Economic Security (CARES) Act

Proposed regulations for these issues are expected in the future.

Please contact your local Blue & Co., LLC tax advisor if you have questions regarding the applicability of these final regulations to your organization.

Blue & Co., LLC acquires Alerding CPA Group

Blue & Co., LLC acquires Alerding CPA Group

Carmel, Ind. (November 23, 2022) – The accounting and consulting firms of Alerding CPA Group (Indianapolis, Ind.) and Blue & Co., LLC (Carmel, Ind.) have announced their merger. The combined firm will operate as Blue & Co., LLC (Blue & Co.), effective December 1, 2022. This acquisition will provide Blue & Co. with greater market […]

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Not-for-Profit Single Audit Requirements – Evaluation of Revenue Sources

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Occupational Mix Survey: What You Need to Know

Every three years, the Centers for Medicare and Medicaid Services (CMS) requires any Hospital that is subject to the Inpatient Prospective Payment System (IPPS) to complete an Occupational Mix Survey (OMS). This data is then used to calculate an Occupational Mix Adjustment Factor (OMAF). The occupational mix adjustment impacts a hospital’s average hourly wage and […]

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