Since the Tax Cuts and Jobs Act (TCJA) was signed into law on Dec. 22, 2017, not-for-profits have been joining together with a common mission – to repeal the tax imposed under the new Internal Revenue Code Section 512(a)(7), attributable to nondeductible parking expenses. This highly controversial tax code has changed the tax-exempts landscape by eliminating a deduction for qualified transportation and other fringe benefits that were previously allowed for all employers. For tax-exempt organizations, however, this elimination of a deduction directly converts to an increase in unrelated business taxable income (UBTI).
Driven by a collective mission, the not-for-profit community has consistently advocated through various sources that the new tax disproportionately hurts tax-exempt entities by imposing a tax on an expenditure, as opposed to a revenue-generating activity. This unified effort is beginning to gain traction by catching the ear of lawmakers. On Feb. 28, 2018, the not-for-profit community received a glimmer of hope when the Lessening Impediments From Taxes (LIFT) for Charities Act was announced. In addition to this bill, other bills to repeal the tax have been introduced, including The Stop the Tax Hike on Charities and Places of Worship Act and the Nonprofits Support Act.
Although the passage of the repeal legislation is uncertain, many organizations like the National Council of Nonprofits are continuing to push for this bipartisan legislation.
While we are in a wait-and-see game with Congress to determine the ultimate future of Internal Revenue Code Section 512(a)(7), it is still important to reach out to your tax advisor to help evaluate the risks and uncertainties to your organization in relation to potential taxable income and UBTI exposure from parking.
For more information about nondeductible parking expenses, please read our recent article on this topic.
Lori Rothe Yokobosky, CPA, Partner, CohnReznick Not-for-Profit & Education Industry Practice
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InsightSpending act repeals UBTI increase for certain transportation fringe benefitsThomas Lanning, Lori Rothe Yokobosky, Dan MascielloTax-exempt employers no longer have to increase their UBTI by amounts paid or incurred in providing parking and public transportation benefits, among others.
InsightCohnReznick Webinar Recap: 2019 FASB Update for Not-for-Profit OrganizationsRecently, CohnReznick’s Not-for-Profit and Education practice hosted a webinar titled, “2019 FASB Update for Not-for-Profit Organizations.” The webinar, the latest in our ongoing Not-For-Profit Governance & Financial Management Webinar Series, focused on key ASUs for not-for-profits. In this article, we provide important hightlights related to ASU 2018-08, “Clarifying the Scope and the Accounting Guidance for Contributions Received and Contributions Made.”