As NPCC told you in our March e-newsletter , as a result of the new federal tax law, nonprofit employers must now pay Unrelated Business Tax Income (UBIT) on some fringe benefits , including on Metrocards and other “qualified transportation fringe benefits” (also known as commuter benefits). This will increase a nonprofit organization’s expenses – especially since the IRS has told conference participants that the tax is not just on the employer contribution, but also on the employee’s pre-tax contribution . Another tax change requires nonprofits with business income to pay the tax on each separate “trade or business” and prohibits the blending of profits and losses across lines of business. Both technically became effective on January 1, 2018, with quarterly tax payments due on April 15 for many nonprofits. Unfortunately for all law-abiding nonprofits, the IRS hasn’t told anyone which transportation benefits are taxable or what types of activities constitute a separate “trade or business.”
 
Many questions must be resolved before nonprofits can know and manage their unexpected tax liabilities. Nonprofits have a right to insist that the government provide both the necessary official guidance for compliance and a reasonable transition period for nonprofits to develop the necessary record-keeping systems. We encourage you to join NPCC, the  National Council of Nonprofits , the  American Institute of Certified Public Accountants , the  American Society of Association Executives , and many other organizations in calling on the Treasury Department and the IRS to delay the new taxes unless and until the government provides clear guidance.

Read NPCC's letter to the Treasury and IRS demanding an immediate delay.
Take Action Now!

Here are two things you can do right now:

1) Go to the  IRS public comment form  and insist that Treasury and the IRS delay implementing the two new UBIT subsections until one year after Final Rules are promulgated. (Fill in the Form/Instruction/Publication Number line with "Form 990-T." Here is sample language you can use for the comment box:

"For legal, policy, and practical reasons, and consistent with established precedent, Treasury and the IRS should immediately delay implementing the two new UBIT subsections, retroactive to January 1, 2018, until one year after Final Rules are promulgated to provide both the necessary official guidance for compliance and a reasonable transition period for nonprofits to develop the necessary record-keeping systems."

2) Share the comments you submit and the questions you have about the new taxes with our colleagues at the National Council of Nonprofits so we collectively can work to get clear answers for you and all nonprofits. Click here to read NPCC's comments.