States Decoupling Automatic Adoption of UBIT on Transportation Benefits

Posted: 06/11/2019
Category: Public Policy

The impacts of the Tax Cuts & Jobs Act not only affected federal requirements for reporting qualified transportation fringe benefits on unrelated business income at the federal level but also at the state level for states that automatically adopt federal guidelines for calculating UBIT.  This means tax-exempt organizations located in states like Minnesota, Hawaii, Illinois, Georgia, and Maine to name a few, would not only be required to pay the 21% federal tax on unrelated business income, but their state income tax as well.   Last year, New York was one of the first states to pass a “decoupling” law, which effectively removed the inclusion of the qualified transportation fringe benefit from being included in the state’s calculation of unrelated business income.   This past week, Minnesota’s Governor signed HB 5which excludes employee fringe benefits from the definition of unrelated business taxable income, effective retroactively to the 2018 tax year.


A bill to repeal state UBIT on transportation benefits (S.B. 1130) has passed through the Hawaii state legislature and is now awaiting the Governor’s signature.  In Illinois, separate bills to decouple UBIT have unanimously passed through the House and Senate (S.B. 1257) and are awaiting a joint bill to reconcile the language before sending to the Governor in the coming days.  its own versions of transportation benefits tax UBIT repeal. The Senate and House both have unanimously passed bills including the decoupling language; they have to reconcile the bills and send to the Governor in the coming days. Unfortunately, a bill in Georgia didn’t survive adjournment.

ACT encourages its membership to look into the issue of automatic adoption of federal guidelines for calculating unrelated business income.  If this is happening in your state and you would like assistance in leading efforts to repeal this policy, please let us know.

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