Governor Romney recently signed a new law that subjects nonprofit corporations for the first time to Massachusetts tax on their unrelated business income. Until now, nonprofit corporations exempt from federal income tax under section 501 of the Internal Revenue Code enjoyed blanket exemption from the Massachusetts corporation excise, even for income subject to the federal unrelated business income tax.
Under the new law, these nonprofit corporations will be subject to the net income component of the corporation excise on their unrelated business income, but will remain exempt from the property component and the overall minimum excise. A corporation with unrelated business income from both Massachusetts and non-Massachusetts sources may apportion its unrelated business income following the standard rules.