December 20, 2019: The unrelated business income tax (UBIT) on nonprofit benefits was repealed! On Friday, December 20, President Trump signed year-end government spending and tax legislation that included repeal of Internal Revenue Code Section 512(a)(7). ASAE applauds Congress and the President for passing this critical repeal. Read ASAE’s press release.
November 2019: ASAE and its UBIT Coalition sent a letter to Congressional leadership to restate its April 2019 call for repeal.
June 2019: The House of Representatives (House) Ways and Means Committee passed the Economic Mobility Act (H.R. 3300), which was introduced by Chairman Richard Neal (D-MA). The Economic Mobility Act includes repeal of the 21-percent Unrelated Business Income Tax (UBIT) on qualified transportation and parking fringe benefits for tax-exempt organizations, among other provisions.
April 2019: ASAE’s UBIT Coalition sent a letter with more than 600 signatories to Congress urging Congressional leadership to repeal this unfair tax on associations and nonprofits.
December 2018: The House passed then-Chairman of the Ways and Means Committee Kevin Brady’s (R-TX) year-end tax bill, which included a full repeal of UBIT on qualified transportation and parking fringe benefits provided by tax-exempt organizations. The Senate bill did not include a tax title and the repeal provision did not become law.
For questions or to get involved, contact the ASAE Public Policy team at email@example.com or at 202-626-2787.
A major issue for associations and nonprofits is the 21-percent tax on parking and transit benefits they provide to employees. In meetings with Treasury officials in 2018, ASAE stressed that the new law disproportionately hurts tax-exempt employers by requiring them to pay a new UBIT on the value of these benefits. ASAE contends this is a new tax on an expenditure, not a revenue-generating activity.
The lack of guidance for tax-exempt entities in this area has also created a lot of confusion and conflicting opinions about how nonprofits should go about calculating their tax liability to comply with the requirement. Many organizations are already making estimated payments to the IRS on this expense—absent any guidance—which further supports ASAE’s request for a delay in implementing this requirement.
“Absent any guidance, tax-exempt organizations cannot confidently and accurately comply with the 21-percent UBIT tax on transportation fringe benefits or the provision that requires separate computation of UBIT for each unrelated business activity,” said ASAE President and CEO John Graham IV, FASAE, CAE. “That’s why the coalition feels strongly that there needs to be a delay. How long the delay should be depends on when we can realistically expect to see guidance.”
Additionally, 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 to avoid being taxed. ASAE has suggested that special consideration be given for employers in localities that mandate transportation benefits.
For more information on how this UBIT provision affects associations and nonprofits, read ASAE’s issue brief.
The UBIT Coalition, which includes more than 115 like-minded organizations, helps advocate for repeal of this UBIT and meets quarterly to exchange ideas and deploy advocacy resources. If you would like to join the UBIT Coalition, please email ASAE’s public policy team at firstname.lastname@example.org.