Money & Business

Congress Passes Repeal of Nonprofit Employee Benefits Tax

By / Dec 19, 2019 (rarrarorro/iStock/Getty Images Plus)

After a two-year advocacy and grassroots campaign by ASAE and the UBIT Coalition, Congress repealed a section of the 2017 tax law that required associations and other tax-exempt organizations to pay UBIT on employee benefits such as parking and transportation.

As part of a massive, bipartisan year-end spending and tax package agreed to this week, Congress repealed a section of the 2017 tax law that required associations and other tax-exempt organizations to pay a 21 percent unrelated business income tax (UBIT) on employee benefits, such as parking and transportation.

Repealing this harmful tax has been the top legislative priority for ASAE and the UBIT Coalition over the past two years, and it would not have happened without the many nonprofit advocates who have amplified the tax-exempt community’s voice on this issue on Capitol Hill.

“The ASAE community not only mobilized quickly after this misguided tax was passed as part of the 2017 tax law, but sustained a years-long advocacy and grassroots campaign to educate lawmakers about how this tax unfairly expanded the UBIT statute to tax basic parking and transit benefits that nonprofits provide to their employees,” said Susan Robertson, CAE, ASAE’s interim president and CEO, in a press release. “ASAE thanks its members and the UBIT Coalition for persistently and convincingly making the case that this tax should be repealed to allow associations and other nonprofit organizations to focus their limited resources on mission-oriented programs and services that benefit society.”

ASAE and the UBIT Coalition also thanked legislators on both sides of the aisle who understood the compliance challenges and administrative burdens that the employee fringe benefits tax created for nonprofit groups, and championed repeal. Ultimately, Congress recognized that nonprofit employee benefits like parking and transit assistance are not a trade or business conducted for the production of income and therefore should not be regarded as taxable under the UBIT statute.

President Trump is expected to sign it to avert a partial government shutdown at midnight on Dec. 20. Once the bill is enacted, repeal of the fringe benefits tax will be retroactive for taxes that nonprofits have paid or accrued after Dec. 31, 2017.

Also included among the provisions in the spending package is a full repeal of the “Cadillac tax” on high-cost employer-provided health plans.

Enacted as part of the Affordable Care Act, the Cadillac tax would have imposed a 40 percent excise tax beginning in 2022 on employer-provided health plans that exceed $11,200 for an individual and $30,100 for a family.

Chris Vest, CAE

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

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