Bipartisan Effort to Repeal Tax on Fringe Benefits for Nonprofits Gains Momentum
Bipartisan Effort to Repeal Tax on Fringe Benefits for Nonprofits Gains Momentum

The news: “Bipartisan legislation to repeal a 21-percent tax on the value of fringe benefits, such as free parking or mass transit assistance, has been introduced [recently] in both the US House of Representatives and the US Senate. The provision was part of the 2017 Tax Cuts and Jobs Act. … The Unrelated Business Income Tax (UBIT) is proving to be a burden for tax-exempt groups, including churches and small charities that have little or no experience dealing with the Internal Revenue Service (IRS) and insufficient guidance on how to calculate the value of parking and other benefits provided to their employees, according to Lauren Precker, social communications and strategy manager at ASAE: The Center for Association Leadership. A new report commissioned by Independent Sector (IS) shows that the new tax will annually divert an average of $12,000 from each nonprofit’s mission. About 10 percent of nonprofits are considering dropping transportation and parking benefits entirely, although these employer-provided benefits are mandated in some metropolitan areas like Washington, D.C., New York, and San Francisco.” –The NonProfit Times

The Church Law & Tax take: Whether this legislation ultimately gets passed remains to be seen. As nonprofit accounting firm Batts Morrison Wales & Lee noted in a recent update through the firm’s e-newsletter, while it is possible the nonprofit parking tax may be repealed, it “is the law of the land.” The firm also noted: “If reserved parking spaces for employees are eliminated by March 31, 2019, the IRS will treat the spaces as non-reserved retroactively to January 1, 2018. But the law could also be repealed retroactively. So, if you take down those reserved parking signs, don’t throw them away.”

In the meantime, church leaders should continue to educate themselves on the provisions of the 2017 Tax Cuts and Jobs Act, as well as the recent guidance issued by the IRS regarding the calculation of the tax on parking provided to ministers and employees.

This content is designed to provide accurate and authoritative information in regard to the subject matter covered. It is published with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional person should be sought. "From a Declaration of Principles jointly adopted by a Committee of the American Bar Association and a Committee of Publishers and Associations."

Due to the nature of the U.S. legal system, laws and regulations constantly change. The editors encourage readers to carefully search the site for all content related to the topic of interest and consult qualified local counsel to verify the status of specific statutes, laws, regulations, and precedential court holdings.

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