In December the House of Representatives passed Chairman 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 government shutdown has paused all action in Washington.
In the new Congress we are asking associations and tax-exempt groups to continue to weigh in with the House and Senate and encourage support of a delay or repeal of the UBIT provision. Our voice has had an impact, and we need to keep up the momentum. For questions or to get involved, contact the ASAE Public Policy team at email@example.com or at 202-626-2787.
One major issue for association and nonprofit professionals is the new 21% tax on employee fringe benefits. The provision removes a deduction for employer-provided benefits, such as transportation, parking, and on-premises athletic facilities. In meetings with Treasury officials earlier this year, ASAE stressed that the new law disproportionately hurts tax-exempt employers by requiring them to pay a new unrelated business income tax (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.
The UBIT Coalition, which includes almost 100 tax-exempt organizations, has recently been reaching out to lawmakers on Capitol Hill to assist in communicating the need for a delay to Treasury. Organizations that would like to become a part of the UBIT Coalition are welcome to email ASAE’s public policy team at firstname.lastname@example.org.
Due to the success of the coalition in sharing this issue with Congress, legislation has been introduced in the House and the Senate to make changes to this provision. To read more see the Associations Now story here.