07/13/2018

Coalition Pushing for Delay on Fringe Benefits

Treasury is being urged to retroactively delay implementation of a new tax provision

The American Society of Association Executives (ASAE) and other members of the UBIT Coalition continue to urge the Treasury Department to retroactively 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 earlier this year, 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.

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, D.C., 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.

The UBIT Coalition has recently been reaching out to lawmakers on Capitol Hill to assist in communicating the need for a delay to Treasury. Last month, Rep. Michael Conaway (R-TX) introduced the “Nonprofits Support Act” (H.R. 6037) to repeal the fringe benefits provision as well as a requirement that nonprofits calculate UBIT separately for each unrelated trade or business.

A POLITICO story this week suggests that any guidance from Treasury on these provisions is probably not forthcoming any time soon. The article quotes a senior administration official as saying that the Office of Management and Budget (OMB) has yet to see priority guidance on numerous elements of the tax law.

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