9/20/2023 0 Comments Lookthrough issues erisa![]() ![]() ![]() Plans have often used foreign “blocker” corporations to shelter other income from UBIT, although the costs and benefits of that approach need to be examined on a case-by-case basis. A complex longstanding provision – the “fractions rule” – exempts most debt-financed real estate investments from UBIT for qualified plans (though not for IRAs or VEBAs). ![]() Under Code section 514, ownership of such “debt-financed property” generally causes a proportionate share of the income from that investment to be subject to UBIT. Under the UBIT rules, tax-qualified retirement plans, voluntary employees beneficiary associations (“VEBAs”), and individual retirement accounts (“IRAs”) may have UBIT merely by investing in a limited partnership that borrows to make one or more investments. We summarize the key aspects of the Final Regulations below. For prior years beginning on or after January 1, 2018, exempt organizations may rely on the Final Regulations or can apply reasonable good faith interpretations of Section 512(a)(6) of the Internal Revenue Code (the “Code”), including methods for identifying separate trades or businesses in Notice 2018-67 (the “Notice”) or the April 2020 proposed UBIT regulations (the “Proposed UBIT Regulations”), in lieu of the Final Regulations. The Final Regulations apply to taxable years beginning on or after December 2, 2020. IRS and Treasury recently released final regulations implementing the 2017 Tax Act changes regarding how UBIT is calculated. The Tax Cuts and Jobs Act of 2017 (the “2017 Tax Act”) made important changes in this area, creating the potential for greater UBIT liabilities for plan investors. In recent years, this issue has arisen frequently as more plans have invested in such vehicles. A pension or welfare plan’s investment in a private equity fund, hedge fund, or real estate partnership, among other investment funds, may give rise to “unrelated business income tax” (“UBIT”). ![]()
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |