Associations need guidance from the Treasury Department on how to comply with new requirements for calculating and reporting unrelated business income, says ASAE, which is asking that implementation be delayed until the government provides clarification.
In a continuing effort to clarify aspects of the new tax law affecting associations, ASAE sent a letter to Treasury Department officials last week requesting a one-year delay in implementing a requirement that unrelated business income (UBI) be separately computed for each business activity.
Previously, exempt organizations could report their UBI from all activities, deduct the related expenses, and pay tax on the resulting net taxable income. The Tax Cuts and Jobs Act establishes the new separate-computation requirement to be effective for tax years beginning after December 31, 2017.
“Additional guidance is urgently needed to assist tax-exempt organizations in determining with certainty what, in the administration’s interpretation, makes up a separate unrelated trade or business,” ASAE said in the letter. “Absent specific guidance, it is extremely difficult for tax-exempt organizations to keep appropriate records and report UBI accurately in compliance with this provision.”
The letter echoes comments submitted to Treasury by the American Institute of CPAs (AICPA) that the lack of guidance on this provision affects tax practitioners who are unable to accurately and consistently advise tax-exempt organizations on the calculation of estimated tax payments for 2018.
Given the substantial recordkeeping changes this provision demands of tax-exempt organizations, ASAE and AICPA have requested a one-year delay to allow tax-exempt organizations time to determine how to comply with the new reporting requirements.
Separately, ASAE is pressing Treasury to make adjustments in a provision in the new tax law that removes a deduction for employer-provided benefits such as transportation, parking, and on-premises athletic facilities. While the provision applies to all employers, ASAE argues that the new law disproportionately hurts tax-exempt employers by requiring them to pay a new unrelated business income tax on the value of benefits.
ASAE submitted comments on the provision in March, and last week, a delegation of association executives met with Treasury officials to discuss changes.