Under the Tax Cuts and Jobs Act (TCJA, December 22, 2017), tax-exempt investors must now calculate unrelated business taxable income (UBTI) separately with respect to each trade or business. As a result, a deduction from one unrelated trade or business for a taxable year may no longer be used to offset income from a different unrelated trade or business for the same taxable year. The TCJA does not define “trade or business” for this purpose, and thus has created anxiety for many tax-exempt investors that receive significant income from a large number of businesses conducted by private equity funds. As discussed below, the IRS issued Notice 2018-67 on August 21, 2018, providing interim guidance for aggregating income reported by tax-exempt investors with respect to separate trades or businesses under Section 512(a)(6) of the Internal Revenue Code, including welcome news pertaining to investments in private equity funds.
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