Money & Business

House Bill Includes Repeal of Tax on Nonprofit Fringe Benefits

By / Nov 30, 2018 (uschools/iStock/Getty Images Plus)

An amendment to a year-end tax package would kill a provision of last year’s tax reform law that requires nonprofit organizations to pay UBIT on certain fringe benefits provided to employees. Its prospects are good in the House but less certain in the Senate.

House Ways and Means Committee Chairman Kevin Brady (R-TX) on Wednesday offered a “manager’s amendment” [PDF] to his year-end tax package that includes a full repeal of unrelated business income tax (UBIT) on qualified transportation and parking fringe benefits provided by tax-exempt organizations.

Included in last year’s Tax Cuts and Jobs Act, the provision forces tax-exempt groups to pay tax on transportation and parking benefits provided to employees. ASAE and the UBIT Coalition have been seeking repeal or delay of this tax for almost a year. Fringe benefits tax repeal is one of several technical fixes included in Brady’s year-end tax bill.

“The policy proposals in this package have support of Republicans and Democrats in both chambers,” Brady said in a statement. “I look forward to swift action in the House to send these measures to the Senate.”

In addition to fixing technical errors in the tax law, the bill would extend about 30 tax breaks that are at risk of expiring and provide tax relief for victims of the California wildfires and other natural disasters that occurred this year.

While the bill is widely expected to pass the House, it faces a less certain fate in the Senate where it will need Democratic votes. Some Senate Democrats have expressed little interest in helping Republicans fix a tax law the GOP passed last year without Democratic support. The price tag for the tax package could also be a point of contention: The Congressional Budget Office this week estimated the package would cost $55 billion over 10 years.

There is bipartisan support for repealing the tax on nonprofits’ transportation and parking benefits, however. Brady said the provision should be repealed to “proactively [eliminate] any potential uncertainty for our churches and community organizations so nothing distracts them from their core mission.”

Earlier this week, Sens. James Lankford (R-OK) and Chris Coons (D-DE) sent a letter to Treasury Secretary Steven Mnuchin urging him to delay implementation of the fringe benefits tax until regulations can be written to clarify how nonprofits are to calculate their tax liability in this area.

ASAE President and CEO John H. Graham VI, FASAE, CAE, said he was encouraged by the repeal effort.

“Since the enactment of this UBIT provision as part of last year’s Tax Cuts and Jobs Act, we’ve had numerous conversations with lawmakers and staff on Capitol Hill, and it’s clear there is broad, bipartisan support for doing away with this tax and allowing associations and other nonprofits to focus resources on their critical missions,” Graham said. “We are not across the finish line yet, however, and we need everyone with a stake in this issue to contact their elected representatives and urge them to support the passage of this repeal provision before the year’s end.”

Chris Vest, CAE

Chris Vest, CAE is director of public policy at ASAE. More »

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