Nonprofits Eye Corporate Structure to Duck IRS Reporting Rules

Nonprofit attorneys are advising clients to consider a strategy that would let them use losses to offset taxable income across their organizations, after the IRS proposed changing reporting rules.

In April, the IRS proposed rules that require individual businesses controlled by nonprofits to report the income separately. That practice, known as “siloing,” changes the ability for a nonprofit to use net operating losses (NOLs) in one business to another to decrease the nonprofits’ overall tax liability.

As a result, some tax lawyers are suggesting that their nonprofit clients create C corporations within their organizations to combine those unrelated ...