CMF has joined the Council on Foundations (COF) and other regional associations of grantmakers around the country in asking our legislative leaders in D.C. to take action to repeal the new unrelated business income tax (UBIT) on nonprofits.

UBIT is a new 21 percent tax imposed on nonprofits that includes fringe benefits such as transportation and parking that nonprofits offer their employees.

As national partners have shared, this tax presents a financial burden on nonprofits both in the tax itself and the administrative reporting costs.

A recent report commissioned by Independent Sector (IS) and funded by the Charles Stewart Mott Foundation details the impact of UBIT on nonprofits.

Data at a glance:

• The new tax will divert an average of $12,000 from each nonprofit’s mission every year.

• The administrative costs required for UBIT will cost a nonprofit on average $15,000 a year.

• The tax on fringe benefits is a more significant burden to smaller nonprofits.

CMF has signed COF’s joint letter to members of the Committee on Ways and Means and Senate Committee on Finance sharing these concerns and asking lawmakers to repeal UBIT for tax-exempt organizations.

This comes after CMF members shared information on the burden of UBIT for the nonprofit sector with lawmakers at Foundations on the Hill in D.C. last month.

In late March, COF also provided testimony to Congress regarding UBIT and other challenges facing the charitable sector as a result of the 2017 Tax Act. COF shared in part, “Aside from the fact that new taxes imposed on charities mean less dollars available for charitable programs, these new rules also affect exempt organizations as employers and increase the cost to employ the hundreds of thousands of individuals working in the sector.”

The deadline for nonprofits to make their first quarterly tax payments for UBIT is in June. We are seeing emerging legislation that attempts to address this issue ahead of the deadline.

Legislation currently under consideration:

• In late February, Senators James Lankford and Chris Coons reintroduced Senate Bill 632, Lessen Impediments from Taxes or the LIFT for Charities Act, to repeal the UBIT on transportation fringe benefits for tax-exempts. This bill has been referred to the Committee on Finance.

• In early March, Congressman Mark Walker and Tom Suozzi reintroduced House Bill 1545,  the LIFT for Charities Act companion legislation. The bill also seeks to repeal the inclusion of certain fringe benefit expenses in UBIT.

CMF will continue to monitor this legislation and share updates as they become available.

Want more?

Check out the report from Independent Sector.