On April 23, the Treasury Department and the Internal Revenue Service (the “IRS”) issued helpful proposed regulations under section 512(a)(6) of the Internal Revenue Code (the “proposed regulations”).  Section 512(a)(6) was enacted as part of the 2017 Tax Cut and Jobs Act (the “TCJA”) and requires exempt organizations (including individual retirement accounts) to calculate unrelated business taxable income (“UBTI”) separately with respect to each of their unrelated trades or businesses, thereby limiting the ability to use losses from one business to offset income or gain from another.[1]  In August 2018, the Treasury Department and the IRS issued Notice 2018-67 (the “Notice”), which provided interim guidance on the application of section 512(a)(6).  The proposed regulations liberalize and simplify the initial guidance in the Notice.  In short:

The proposed regulations will apply to taxable years beginning on or after the date the regulations are published as final; however, taxpayers may rely on the proposed regulations before they are finalized.  In addition, until the proposed regulations are finalized, exempt organizations may rely on a reasonable, good-faith interpretation of what constitutes a separate trade or business under current law or the methods described in the Notice for aggregating or identifying separate trades or businesses.