A provision in the tax law passed last year eliminated a deduction for transportation and other fringe benefits provided by employers. ASAE will take a group of association executives to the Treasury Department to voice concerns about the measure’s impact on nonprofit organizations.
ASAE and many other associations are still seeking changes to, or at least clarification on, a handful of provisions in the tax law enacted at the end of last year.
A delegation of association leaders, arranged by ASAE, will to meet with Treasury officials on April 25 to discuss changes in the new tax law affecting fringe benefits. ASAE submitted comments on recently issued guidance on fringe benefits late last month.
The fringe benefits provision 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 (UBIT) on the value of benefits. The association contends that this is a new tax on an expenditure, not on a revenue-generating activity.
In addition, some cities—including Washington, DC, New York, and San Francisco—have mandated that employers provide pretax mass-transit benefits, so employers in those cities do not have the option of changing those benefits.
Jim Clarke, CAE, ASAE’s senior vice president for public policy, said the goal of the meeting with Treasury will be to share with officials how the benefits provision affects tax-exempt employers in particular. The delegation will reinforce the need for a delay in implementing the provision and ask for special consideration for employers in localities that mandate transportation benefits.
“We appreciate Treasury’s receptiveness to meeting with us on this important issue. This is a big issue for tax-exempt organizations who are facing a new UBI tax on transportation and parking benefits,” Clarke said. “This is also a bit unusual in that this marks the first time in our estimation that associations and other tax-exempt groups are paying UBIT on an expenditure, not a revenue-generating activity.”
He added that many ASAE members “have concerns with this provision, and we look forward to sharing some of those stories with Treasury so they can start to see this issue through the eyes of our member organizations.”
Meanwhile, ASAE is also preparing to ask Treasury for more guidance on a provision in the tax law that requires that UBI be separately computed for each business activity. The provision was ostensibly intended to prevent tax-exempt groups from using the loss from one unrelated business activity to offset the income from another.
Given the absence of guidance on this new requirement, groups like the American Institute of CPAs have asked Treasury to delay implementation of the provision for one year to give tax-exempt organizations adequate time to comply. ASAE plans to echo AICPA’s comments in its own letter to Treasury next week, Clarke said.