06/07/2018

ASAE Still Concerned Over Fringe Benefit Tax Provision

The issue is a problem for nonprofit and for-profit businesses

The American Society of Association Executives (ASAE) continues to wait for a response from the Treasury Department after delivering a sign-on letter last month from close to 200 tax-exempt organizations, including the Ohio Society of Association Executives (OSAE), concerned about a provision in the new tax law that taxes transportation and parking benefits provided by many employers.

The fringe benefits 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 nonprofit organizations 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.

ASAE also pointed out that some cities, including Washington, D.C., 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 has also shared its concerns about the transportation fringe benefits provision with House Ways and Means Committee members. The Ways and Means Committee has been holding a series of hearings in recent weeks to assess how the new tax law is working.

This article was provided to OSAE by the Power of A and ASAE's Inroads.