IRS revises UBIT rules - Internal Revenue Service; unrelated business income tax - Brief Article

Healthcare Financial Management, Nov, 1991

The Internal Revenue Service (IRS) has published proposed rules that conform its regulations to a 1978 statutory change ensuring that tax-exempt organizations do not have to pay unrelated business income tax on net income from certain securities loans. A related statutory change extended coverage of the excise tax on private foundations' net investment income to net income from these securities loans.

In addition, the proposed rules respond to recent public comments by clarifying that Section 512(b) (1) of the Internal Revenue Code, which outlines various exclusions from unrelated taxable business income, generally excludes not only dividends, interest, payments with respect to securities loans, and annuities, but also (to the extenst determined in an IRS revenue ruling) substantially similar income from an exempt organization's connection with a securities portfolio. The proposed rules would be effective for amounts received after Aug. 30. The rules were published in the Sept. 3 Federal Register. Comments are due Nov. 22.