12/13/2018

Treasury Issues Guidance on Fringe Benefits Tax

Last year’s tax law sets a 21 percent tax on so-called fringe benefits

While congressional leaders worked this week to repeal the fringe benefits tax on nonprofits, the Treasury Department issued interim guidance on Dec. 10 to help soften the tax blow on the sector.

Last year’s tax law sets a 21 percent tax on so-called fringe benefits – such as free parking or mass transit assistance – that nonprofits provide to employees. The American Society of Association Executives (ASAE), the Ohio Society of Association Executives (OSAE) and many other tax-exempt organizations have been asking for this guidance and for a delay in implementing the provision for almost a year.

“Treasury is sensitive to the concerns of the tax-exempt community and hopes this guidance can significantly limit the impact on nonprofit groups,” Treasury Secretary Steven Mnuchin said in a statement this week. “Treasury is offering tax-exempt organizations a road-map for navigating their responsibilities. The guidance issued today aims to provide flexibility while minimizing the burden on nonprofit groups that provide employee parking.”

The guidance allows tax-exempt organizations to retroactively reduce the amount of non-deductible parking expenses and provides a safe harbor for nonprofits potentially to exclude all parking expenses from the tax. The guidance stipulates that only parking expenses associated with employee-reserved spots are included when calculating unrelated business income tax. Tax-exempt groups have until March 31 to eliminate their employee-reserved spots and avoid the tax entirely. Treasury also provides estimated tax penalty relief for 2018 for tax-exempt organizations that offer these benefits.

ASAE is still analyzing the Treasury guidance but it does appear to provide tax-exempt organizations some certainty until Congress can change the law. ASAE, OSAE and the UBIT Coalition support Ways and Means Committee Chairman Kevin Brady’s (R-TX) recent efforts to repeal the tax entirely.

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