April 20, 2020

On April 16, GRF’s Director of Nonprofit Tax, Richard J. Locastro, CPA, JD was quoted in Tax Notes about Office of Management and Budget’s (OMB) second review of proposed guidance from IRS and the Treasury Department on calculating the unrelated business taxable income (UBTI) of tax-exempt organizations. He cited the interaction of the Coronavirus Aid, Relief, and Economic Security (CARES) Act and section 512(a)(6) as a possible reason for the second review.

In the article, Mr. Locastro notes that section 512(a)(6) limits a tax-exempt organization’s ability to offset income from another trade or business with losses from a trade or business in tax years beginning after 2017. Because the CARES Act allows for the carryback of net operating losses (NOL) arising in a tax year beginning from 2018 to 2020, the interplay between the two is not clear.

IRS and Treasury did not provide comment on the reason for the second review. Mr. Locastro was hopeful that IRS added guidance on the NOL carrybacks issue necessitated by the CARES Act changes, and that this additional guidance resulted in the regulations being sent back to OMB’s Office of Information and Regulatory Affairs (OIRA) for review. Note: the second review by OIRA was completed on April 16, two days after the regulations were sent back.

For the latest information on implementation of the CARES Act and other accounting and tax resources related to the COVID-19 crisis, visit GRF’s COVID-19 Response page.