Proposed changes to group exemption letter program, UBTI ‘silo’ rules and more

June 15, 2020

Authored by: Keith Kehrer

IRS solicits public comments on proposed changes to group exemption letter program; will temporarily stop accepting requests for group exemption letters on June 17, 2020 

Notice 2020-36 contains a proposed revenue procedure that sets forth updated procedures under which recognition of exemption from federal income tax for organizations described in Section 501(c) of the Internal Revenue Code may be obtained on a group basis for subordinate organizations affiliated with and under the general supervision or control of a central organization. The IRS requests comments on all aspects of the proposed revenue procedure, including applicable grandfather and transition rules. Comments should be submitted on or before August 16, 2020.

Pending publication of the final revenue procedure in the Internal Revenue Bulletin, Rev. Proc. 80-27 continues to apply. However, the IRS will not accept any requests for group exemption letters beginning June 17, 2020, until publication of the final revenue procedure or other guidance.

IRS, Treasury issue guidance for applying UBTI ‘silo’ rules for tax-exempt organizations by identifying separate trades or businesses 

The Treasury Department and IRS announced proposed regulations under the Tax Cuts and Jobs Act (TCJA) that provide guidance for tax-exempt organizations with more than one unrelated trade or business on how to calculate their unrelated business taxable income (UBTI).

Changes under the TCJA require tax-exempt organizations subject to the UBTI tax to compute UBTI, including any net operating loss deduction, separately for each trade or business (referred to as a “silo”) for tax years beginning after December 31, 2017. The proposed regulations provide guidance on identifying separate trades or businesses, including investment activities, as well as certain other amounts included in UBTI.

Updates on the implementation of the TCJA can be found on theTax Reform page of IRS.gov.

Common errors to avoid when filing for advance payment of employer credits

Employers filing Form 7200, Advance Payment of Employer Credits Due to COVID-19, should read the instructions carefully and take their time when completing the form to avoid mistakes and prevent processing delays.

The following are some common errors to avoid when filling out Form 7200:

  • Missing or inaccurate Employer Identification Number. Each EIN should be exact. Taxpayers must complete this box.
  • Check only one box for the applicable calendar quarter. Only one box should be checked for the correct quarter.
  • Check only one box for Part 1, Line A.
  • Make sure to complete Part 1, Line B. In Part 1, Line B check either Yes or No.
  • Complete Part II, Lines 1-8 using actual dollar amounts. Part II should be completed using dollar amounts, not the number of eligible employees. All lines in Part II should be completed with an actual dollar amount.
  • Check the math. Taxpayers should make sure they check the math on lines 4, 7 and 8.
  • Sign the form. Taxpayers should remember to sign the form. Failure to sign the form will result in an automatic rejection.

New Issue Snapshot 

403(b) Plans – Catch-Up Contributions discusses catch-up contributions under a 403(b) plan, which is a retirement plan maintained by a 501(c)(3) organization, minister, or public educational institution. 

Visit IRS.gov for a complete listing of available Issue Snapshots.

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