The 2017 Tax Reform Act (H.R. 1) continues to reveal more surprises for Churches. One of these is the Unrelated Business Income section. In the past a Church was allowed to have fund-raisers and other Unrelated Business Income (UBIT) without a requirement to report it to the Internal Revenue Service if all of that income for the year was less than $1,000. This has changed.
In the new tax code Churches may no longer aggregate the Unrelated Business Income, but must list each separately. The Council for Non Profits interpreted the effect of the new change as:
Only the first $1,000 of unrelated business income is exempt from taxation under previous law, so the proposed changes would affect many organizations of varying sizes.
The change to UBIT could result in increased taxes on nonprofits, taking revenue away from nonprofits’ mission-related programs and services.1