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Unrelated Business Income Tax
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.
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.
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.
ASAE contends UBIT is a new tax on an expenditure, not a revenue-generating activity. “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.”
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 email@example.com.
Power of Associations Key Contact
For more information about UBIT and other ASAE advocacy initiatives and how you can get involved, contact the Public Policy team at 202.626.2703 or firstname.lastname@example.org