National tax-reform has changed the landscape for nonprofits, including the new 21% tax burden on transportation benefits and employee parking.
Unrelated Business Income Taxes (UBIT) | Nonprofit Transportation Benefits
In about three weeks, charitable nonprofits, houses of worship, foundations, and other nonprofits will have to send in estimated payments to the IRS to pay taxes on their expenses for providing transportation benefits, including free parking and transit passes. More tax payments will be due a month later. That is, unless Congress will listen to nonprofits and repeal the tax in time. You can help by taking at least two actions today: sign your organization onto a letter calling for repeal (see text of the letter), and contact our Senators and your Representative to ask for repeal now!
On December 22, 2017, President Trump signed into law Public Law No. 115-97, unofficially called the Tax Cuts and Jobs Act, that imposes a 21-percent unrelated business income tax on nonprofits for expenses they incur in providing their employees with transportation fringe benefits, such as parking and transit passes. In December 2018, the Treasury Department and the IRS provided partial guidance on how to calculate this new tax on parking expenses, but assumes that all expenses for bus and transit passes are subject to the tax. In both parking and transit benefits, the government will require the nonprofit employer to pay the tax on amounts employees request to be withheld from their paychecks pursuant to voluntary compensation reduction agreements.
There is broad, bipartisan support for repealing this tax on tax-exempt organizations. In fact, there is not a Senator or Representative on record supporting keeping the tax. The problem is timing: left on its own, Congress won’t get around to repealing the nonprofit transportation tax until later this year or next, if at all. Partisan differences on unrelated tax issues are delaying action on this nonpartisan, but urgently needed fix. Congressional leaders essentially are delaying repeal of the tax on tax-exempt organizations now as a negotiating tactic for other issues they consider higher priorities. Charitable organizations must deliver the message loudly and forcefully: Don’t hold community nonprofits hostage to partisan bickering; repeal the nonprofit transportation tax before April 15.
Learn more about this new tax on nonprofits.