ASAE and a delegation of association representatives met with Treasury officials April 25 to discuss a provision in the new tax law affecting fringe benefits such as parking and transportation.
ASAE submitted comments on fringe benefits late last month. The fringe benefits provision in the Tax Cuts and Jobs Act removes a deduction for employer-provided benefits such as transportation, parking and on-premises athletic facilities. While the provision applies to all employers, the new law disproportionately hurts tax-exempt employers by requiring them to pay a new unrelated business income tax (UBIT) on the value of benefits. ASAE contends this is a new tax on an expenditure, not a revenue-generating activity.
In addition, some cities, including Washington, DC, New York and San Francisco, have mandated that employers provide pre-tax mass transit benefits, so employers in those cities do not have the option of changing those benefits.
Attendees at the meeting shared with Treasury officials how this provision impacts tax-exempt employers in particular, and emphasized the need for a delay in implementation of this provision and special consideration for employers in localities that mandate transportation benefits.
The lack of guidance for tax-exempt entities in this area has created a lot of confusion and conflicting opinions about how nonprofit organizations should go about calculating their tax liability to comply with the requirement, ASAE said. Many organizations are already making estimated payments to the IRS on this expense, absent any guidance, which further supports the request for a delay in implementing this requirement.