Charities Must Consider UBIT Consequences of Creative Fundraising

The Tax Cuts and Jobs Act was signed into law in December and made sweeping changes to many laws affecting tax-exempt organizations. Several changes combined to eliminate the tax incentive for many taxpayers to make charitable contributions. With anticipated declines in contributions, charities may be looking for more creative sources of fundraising to sustain their operations, such as advertising online and in publications, promoting or hosting events with for-profit companies, selling products, engaging in restaurant nights, or providing consulting or other services. While such activities raise revenue, charities need to be mindful of the rules related to the unrelated business income tax (UBIT) and the changes that were made to such rules under the Act.