IRS Rules Make Nonprofits’ Offshore Tax Strategy ‘Bullet-Proof’

April 23, 2020, 8:33 PM

The IRS has given the green light to a tax-planning method that gives nonprofits the benefit of not paying tax on income generated through offshore private equity investments.

Proposed regulations (REG-106864-18) released Thursday codify a long-standing IRS position deeming passive offshore investment income to be dividends when distributed to nonprofits, and therefore not taxable. Many nonprofits invest cash in offshore intermediaries, sometimes called blockers, that make private equity investments in active trades or businesses.

Nonprofits previously relied on private letter rulings that the IRS later combined into a notice. But because notices are ...

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