The Need for Ubi Expense Allocation Methods for Tax-Exempt Organizations
Posted: 6 Dec 2005
Abstract
This paper discusses the importance of establishing legislative guidance concerning cost-allocation methods when tax-exempt organizations are engaged in unrelated business activities. Tax-exempt organizations often report losses from unrelated business activities, and many question whether these losses are generated due to various cost allocation methods. Consistent guidance for these organizations is lacking from the Internal Revenue Service (IRS). The choice of allocation method can greatly alter the resulting profit/loss from the activity. Sound tax policy is needed to deter the over-allocation of costs related to unrelated business activities.
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