10/18/2018

Congress Urged to Delay Tax on Fringe Benefits

UBIT Coalition draft letter urging the provision's effective date

The Ohio Society of Association Executives (OSAE), the American Society of Association Executives (ASAE) and other members of the UBIT Coalition have drafted a sign-on letter urging Congress to delay the effective date of a provision in last year’s tax law that imposes a 21 percent unrelated business income tax on qualified transportation benefits.

The tax change is forcing many tax-exempt employers, including churches and other 501(c)(3) groups, to file federal Form 990-T returns for the first time. The members of the UBIT Coalition have repeatedly asked the Treasury Department to issue guidance on how organizations should value transportation and parking benefits, but so far tax-exempt groups have no clear instructions on how to file.

The coalition is planning to send the sign-on letter to House and Senate tax-writing committees on Oct. 26. The letter stresses that full repeal of the provision is preferable, but at minimum, the tax-exempt community needs a delay in the effective date of the provision for at least a year to establish new accounting systems to value and track such benefits and to receive further guidance from Treasury.

If your organization would like to join the sign-on letter, please send an email by close of business tomorrow - Oct. 19 - to Nick Fimek via email.

The coalition also comments on the issue of fairness, pointing out that for-profit corporations also must pay tax on these employee benefits, but the tax law lowered the corporate tax rate considerably, while tax-exempts received no similar tax relief.

“To be clear, subjecting the tax-exempt sector to UBIT on transportation and parking benefits diverts funds that would otherwise go toward valuable mission services,” the coalition said.

The coalition also points out that some localities, including Washington D.C., New York and San Francisco, mandate employers over a certain size provide transportation fringe benefits. The group estimates that approximately 2 million employees work for tax-exempt groups in cities that mandate transportation fringe benefits. The letter asks Congress to consider a carve-out for tax-exempt organizations that are already required by law to provide parking and/or other qualified transportation benefits to employees.

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