A provision in the tax law passed last year eliminated a deduction for transportation and other fringe benefits provided by employers. In a letter delivered to the Treasury Department last week, ASAE and 150 organizations asked the agency to delay its implementation.
On May 24, ASAE delivered a letter to the Treasury Department [PDF], which was signed by more than 150 organizations, urging the agency to delay implementation of 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 in April, 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.
“On behalf of ASAE and the undersigned organizations, we respectfully urge Treasury to delay implementation of this provision for one year to assist tax-exempt organizations struggling to determine their UBTI liability for qualified transportation fringe benefits and costs associated with any parking facility used to provide employee parking,” stated the letter.
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, DC, 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.
In addition, ASAE has 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 this month to assess how the new tax law is working.