Unrelated business taxable income (UBTI)

You received a letter because you hold an interest in master limited partnership (MLP) or limited partnership (LP) product in either a retirement account or a health savings account and your account holdings are being reviewed for a potential 990-T filing.

According to the IRS instructions for Form 990-T, as custodian of the IRA, Fidelity Management Trust Company (FMTC) is required to file form 990-T on behalf of all custodian IRAs that have a filing obligation. Also see IRS publication 598 for tax information on unrelated business income of exempt organizations or IRS publication 541 for tax information on partnerships and partners.

The 990-T filing is not limited to alternative investments. It includes master limited partnerships (MLPs), or publicly traded LPs, and limited partnerships (LPs), or privately traded LPs (i.e., not on NYSE, AMEX, etc.), held in retirement accounts or health savings accounts. While uncommon, other investments such as real estate investment trusts can also sometimes meet these criteria.

Not necessarily; when total positive unrelated business taxable income (UBTI) amounts across all applicable partnership securities held in a retirement account equal $1,000 or more, then Form 990-T must be filed.

To determine if you've earned UBTI, review the following details on your Form K-1:

• UBTI from operating results of the MLP or LP (typically reported on line 20-V of Form K-1).
• Ordinary gains (MLPs only) generated from the liquidation of the partnership interest are 100% reportable as UBTI on Form 990-T.
• Unrelated debt financed income (UDFI). UDFI is the portion of the gains associated with a sale/liquidation of a partner's interest in a partnership or proceeds from a taxable corporate action that is attributable to the acquisition indebtedness, commonly referred to as debt-ratio (this information is obtained directly from the partnership).
• Income from cancellation of debt.

The total amount of positive unrelated business income (UBI) earned by the retirement or health savings account will be reported on the 990-T. This is reduced by allowable deductions such as 199A qualified business deduction and net operating losses as well as a $1,000 specific deduction. UBTI is UBI less the allowable deductions. See the Form 990-T instructions for more details.

Yes, the IRS requires a separate EIN for each entity (retirement or health savings account) required to file Form 990-T. When an IRA is required to file Form 990-T, an Employer Identification Number must be obtained for tax filing purposes. The account owner's Social Security Number cannot be used for this filing as the account owner is a different taxable entity.

No, 990-T filings will not be made for your non-retirement accounts.

Where applicable for accounts that are included in various stages of the 990-T filing process, we'll send you the following notifications, as necessary:

• Notification of the Employer Identification Number (EIN) assigned, when 990-T extension (Form 8868) has been filed on your IRA's behalf, and the securities that are under review for a potential 990-T filing.
• Notification 990-T filing and tax payment due, when applicable.
• Notification 990-T filing was incomplete and missing documentation may be required.

The tax payment must be made out of the account that holds the MLP or LP (inclusive of alternative investments) that generated the unrelated business taxable income (UBTI). The payment is made directly to the IRS and will not be reported as a tax reportable distribution on IRS Form 1099-R.

Several data elements are used to calculate the unrelated business income tax (UBIT) amount including total UBTI, deductions, and the trust tax rate. The most up-to-date trust tax table can be found on IRS.gov. These calculations are complex, and you're encouraged to review Form 990-T with your tax advisor.

If Fidelity determines that your retirement account has a tax payment obligation, you will receive a letter outlining the tax amount due with a copy of the IRS Form 990-T that will be filed with the IRS.

Tax payments are made on the date your Form 990-T will be filed with the IRS. This date will be noted in the tax payment letter. Payments will be made as nonreportable distributions via bank wire directly to the IRS and will reflect in Orders & History as a "partial transfer of assets."

Yes, please contact Fidelity to have the payment made.

Fidelity will still file Form 990-T with the IRS. Penalties and interest will continue to accrue after the failed payment attempt. If you make funds available after the payment due date, contact Fidelity to help facilitate a payment.

The plan sponsor is responsible for the tax liability, but the payment will be taken from each participant's account.

The K-1 tax form is sent directly by the partnership, and is not a Fidelity tax form. If you have questions about your LP K-1, you must contact the general partner or the partnership. For an MLP K-1s, you need to contact the firm that services the partnership. Nearly all MLPs are serviced by either PricewaterhouseCoopers, taxpackagesupport.com, Deloitte, or partnerdatalink.com.

Please contact your tax advisor to review your 990-T filing and provide any specific questions to Fidelity, as necessary. Fidelity will help facilitate any necessary amendments. Please do not request that your tax advisor file an amendment on your behalf.

If new information is received from the partnership or account owner of the IRA that would impact the tax liability, then Fidelity Management Trust Company (FMTC) will prepare an amended 990-T filing. Per the IRS, amendments should not be filed within 60 days of the original filing. If the amendment results in a refund, the IRS will send a refund with applicable interest to FMTC for deposit into the retirement account as a nonreportable contribution.