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IRS Nears Finish Line for Nonprofit Income Reporting Rules (Corrected)

Feb. 21, 2020, 4:15 PMUpdated: Feb. 24, 2020, 1:23 PM

The IRS is nearly done with proposed rules that require nonprofits to report income streams separately, an agency official said.

The agency is “getting very close to the finish line,” Stephanie Robbins, an IRS attorney, said Friday at a TEGE Exempt Organizations Council conference.

The 2017 tax law required nonprofits to separately report each flow of income unrelated to their main purpose. Prior to the overhaul, tax exempt organizations could group income from things like basketball tickets, rental property, and corporate partnerships all in one bucket.

Robbins said the process should be faster going forward.

“Once the proposed reg is published, I would urge people to submit comments as soon as they can,” she said.

The Section 512(a)(6) change—often referred to as siloing or basketing—is aimed primarily at large organizations, such as universities, that could have many income streams. It has introduced complexity for nonprofits that employ volunteers in multiple areas of unrelated business or business unrelated to the nonprofits’ core mission.

The White House Office of Information and Regulatory Affairs began reviewing proposed rules on Feb. 3. An OIRA review is one of the last steps before the rules can be released.

The bulk of comments the agency received on Notice 2018-67 address use of the North American Industry Classification System to help sort out unrelated business taxable income and generally support using a smaller two-digit reporting code, Robbins said.

(Corrects IRS attorney’s last name in Feb. 21 story.)

To contact the reporter on this story: Sam McQuillan in Washington at smcquillan@bloomberglaw.com

To contact the editors responsible for this story: Jeff Harrington at jharrington@bloombergtax.com; Sony Kassam at skassam1@bloombergtax.com

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