Providers’ Council members and other nonprofits continue to seek guidance from the federal government on changes to Unrelated Business Income Tax (UBIT), also referred to as Unrelated Business Taxable Income (UBTI). Changed under the Tax Cut and Jobs Act (TCJA) that went into effect on Jan. 1, 2018, qualified transportation fringe benefits (i.e. pre-tax commuter passes or parking passes) offered to nonprofit employees will now be considered UBIT if employees are not taxed for them.
UBIT has gotten very little attention publicly from Treasury/IRS, according to the National Council of Nonprofits. A government official acknowledged in October that they “are working on proposed regulations,” but gave no timeframe. The National Council says the new unrelated business tax on nonprofit-provided transportation benefits was intended to “parallel” the law change that prevents for-profit businesses from deducting their costs for these benefits. Treasury and the IRS reportedly are writing regulations to apply to the for-profit part of the law, and then crafting a “you too” set of rules for nonprofits. They could also delay implementation until guidance is provided.
Providers’ Council Associate Members AAFCPAs and CitrinCooperman have posted several resources about UBIT/UBTI online. Two articles that provide insight are “IRS’s Position on Taxability of Qualified Transportation Benefits is Broad Reaching, Adversely Affecting Many Nonprofits,” by AAFCPAs’ Joshua England, posted in the Alerts & Insights section of aafcpa.com; and “UBTI Changes to the Tax Cuts and Jobs Act Impacting Tax-Exempt Organizations” by Joseph Barreca and posted in the In Focus section at citrincooperman.com.