Potential Modifications to the UBIT – Unrelated Business Income Tax
Specifically, under the 2017 Act, there was an increase of unrelated business taxable income (UBTI) for many exempt organizations. One increase was for qualified parking, (i.e., parking provided pursuant to a compensation agreement by an employer to an employee). Under the Act, such parking is considered a “fringe benefit”. Therefore, under section 512(a)(7), currently in effect, there is now a 21 percent income tax on the value of this fringe benefit which is a tax on the employer. However, under the proposed bill now before Congress, this rule would be repealed for those tax-exempt employers that offer this parking benefit.
If passed, this, and other proposed changes included in the bill would also favorably affect non-profits. For example, the bill also proposes an extension of electronic filing capabilities to the 990-T return, which currently needs to be paper filed.
While we wait to see if some version of these proposals will pass into law, there are still questions surrounding the qualified transportation benefit provisions under the 2017 Act that organizations continue to struggle with. We therefore encourage you to reach out to your trusted CohnReznick tax advisor for help in understanding and complying with the rules.
For more information, please contact Lori Rothe Yokobosky, CPA, Senior Manager, Tel: 973-403-6940, LoriRothe.Yokobosky@CohnReznick.com.
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