06/21/2018

IRS Mulls Delaying New Rules for Tax-exempt Organizations

The IRS is considering postponing enforcement of two provisions in the TCJA

The Internal Revenue Service (IRS) is considering postponing enforcement of two provisions in the new tax law exposing tax-exempt organizations to unrelated business income tax liability, according to Bloomberg BNA.

Last year’s Tax Cuts and Jobs Act (TCJA) added a requirement that tax-exempt organizations report unrelated business income (UBI) for each trade or business separately. Previously, exempt organizations could report their UBI from all activities, deduct the related expenses and pay tax on the resulting net taxable income. Another provision in the law makes expenditures by tax-exempt organizations on transportation fringe benefits subject to an unrelated business income tax (UBIT) of 21 percent.

Both provisions are effective for the 2018 tax year, but the American Society of Association Executives (ASAE) and others have argued that a delay is warranted given the absence of guidance from the Treasury Department on how tax-exempt organizations should comply with the tax changes. ASAE submitted comments to Treasury earlier this year contending that tax-exempt organizations are struggling to determine their UBIT liability for qualified transportation fringe benefits and costs associated with any parking facility used to provide employee parking.

This week, Bloomberg BNA reported that a delay is being considered and quoted an attorney in the IRS’s Office of Associate Chief Counsel. The official was not able to give timing on any possible delay, but many tax-exempt groups are already filing quarterly estimated taxes absent critically-needed guidance on this new tax.

This article was provided to OSAE by the Power of A and ASAE's Inroads.