IRS clarifies royalty exception to UBIT

Description

Abstract: Provisions in the TCJA have brought renewed attention to nonprofits’ potential liability for unrelated business income tax (UBIT). Organizations generally are subject to a 21% tax on unrelated income, but exceptions apply — including one for royalties. This article discusses a recent IRS Technical Advice Memorandum that sheds light on factors the tax agency weighs when evaluating whether income constitutes excluded licensing royalties.