Committee OKs Legislation With UBIT Repeal

The House Ways & Means Committee yesterday released legislation that includes the repeal of a tax on transportation benefits that nonprofits have called ill-advised and have been working to eliminate.

Section 512(a)(7) imposes an unrelated business income tax (UBIT) on nonprofits for the expenses providing transportation benefits to their employees. Nonprofit employers are subject to a 21-percent tax on the amounts they spend providing transit passes to employees but also applies to charities, such as houses of worship, that pay to provide parking for employees.

Section 401 of the “Economic Mobility Act of 2019” (H.R. 3300) would repeal the tax. The legislation was introduced Tuesday by Ways and Means Committee Chairman Richard Neal (D-Mass.). Several other bills have been introduced in both the House and Senate this year to repeal or address the tax in varying ways. The provision went into effect May 15 for organizations operating on a calendar-year basis, as part of the Tax Cuts and Jobs Act (TCJA) approved in December 2017.

A position statement by the Evangelical Council for Financial Accountability (ECFA) collected more than 2,500 signatures. An April letter from the National Council to Congressional leaders urging repeal was signed by more than 600 organizations.

“Today was a victory for common sense and a strong show of respect for America’s nonprofits,” David L. Thompson, vice president of public policy for the National Council of Nonprofits, said via a press release. While the final committee vote on the overall bill was divided, he said there was near-universal bipartisan agreement that the new tax on nonprofits must go.

“Committee members of both parties made strong statements in favor of repeal and voted that way in different acts of political theater,” said Thompson, urging the full House and Senate to agree to take up repeal of the tax before the next payments come due.

A hearing on the UBIT provision originally scheduled for Wednesday was canceled but written testimony was included in the record at the markup of tax legislation by the full committee yesterday. Among those who were scheduled to testify were Thompson, along with John Graham, president and CEO of the American Society of Association Executives (ASAE); Christopher Augostini, executive vice president for business and administration at Emory University; Andrea Barton Reeves, president and CEO of Harc, Inc., and Nathan J. Diament, executive director of public policy for the Union of Orthodox Jewish Congregations of America.