Unrelated Business Income Tax (UBIT)

 

**Update: UBIT Repeal passed & signed into law in 2019 tax extenders bill**

After two years of advocacy from ACT and other organizations to repeal the inclusion of the Unrelated Business Income Tax on transit benefits provided by exempt organizations, the repeal was included in the 2019 year-end tax extenders package, passed in Congress and was signed by the President late December 2019.  The Association for Commuter Transportation has been working to collect feedback from members on the impact of this tax and advocate for its repeal. 
 

"What an amazing feat with the repeal of UBIT, this was a tremendous gift for the New Year and very welcome as we prepare our budget for next year and our need to lower our operating expenses considerably for next fiscal year." - Jeff Olschwang, University of California Los Angeles

In 2017, Congress passed the Tax Cuts & Jobs Act (TCJA) which included some changes to the Qualified Transportation Fringe Benefit (QFTB) - especially for tax-exempt organizations.  Within the bill, there is language that effectively provides that the unrelated business taxable income of an exempt organization be increased by the amount of the benefit (pre-tax and subsidy) provided to employees.  As a result, non-profits (hospitals, universities, museums, etc.) providing a commuter transportation benefit were hit hard, as they had to pay an unrelated business income tax (UBIT), equal to 21% of the total value of the transportation and parking benefits provided as a subsidy to employees or funded through a pretax payroll deduction. The Bicycle Benefit was eliminated by the TCJA.

Now that it has been repealed, Ways and Means Chairman Richard Neal and Oversight Subcommittee Chairman John Lewis have sent a letter to IRS Commissioner Rettig requesting the agency quickly provide refunds to nonprofits that paid UBIT on transportation fringe benefits.

 

ACT Resources

 

 

Additional Resources

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