The House and Senate propose legislation to repeal the new law on unrelated business income tax losses and on taxable compensation for employee parking and bus passes.
By Howard Donkin, CPA
Before the new Jumpstart Our Business Startups (JOBS) Act, the IRS allowed losses from unrelated business activity to be applied to other business income and allowed an exclusion from personal income for employee parking and bus passes.
Starting in 2018, nonprofits must keep separate (silo) losses and pay a 21 percent excise tax on an organization’s employee parking and bus passes. For the details of these new laws, see IRC 512(a)(6) and 512(a)(7).
On June 7, 2018, the House proposed the Nonprofits Support Act (HR-6037) to repeal the requirement that unrelated business taxable income be computed separately for each trade or business activity, and to repeal the increase of unrelated business taxable income by certain disallowed fringe benefits. The Senate proposed a similar bill, called the Protect Charities and Houses of Worship Act (S.3317).
The American Institute of CPAs (AICPA) Exempt Organization Technical Resource Panel (EO-TRP) has requested guidance from the IRS on how to implement IRC 512(a)(6) and 512(a)(7), but has not received any response. The nonprofit community is frustrated about the lack of guidance, and the general sense is that the slow going is due to the need for coordination from other offices and that the Schedule B guidance was of a higher priority.
Another possible reason for the lack of guidance is that the pending legislation on the repeal of IRC 512(a)(6) and 512(a)(7) may be impacting whether the chief counsel’s various offices are prioritizing the guidance. The bill was introduced in June and currently has bipartisan support from four co-sponsors. If the IRS thinks that a repeal is coming or likely, then those counsel offices that have other items on their plates may think it isn’t worth devoting as many resources to or may be taking it a bit slower to see whether the repeal initiative gains steam.
If you are frustrated by the burden that these new rules have placed on your organization, now is the time for you to contact Representative Dave Reichert (R-WA) if he represents you. He serves on the House Ways and Means Committee, which has jurisdiction over the bill. Washington Nonprofits has spoken with his staff on this issue and they are very interested in hearing from nonprofit organizations based in his district that are impacted by the new tax.
About the Author
Howard Donkin, CPA, Jacobson Jarvis Tax Partner, has more than 20 years’ experience in serving the not-for-profit community. Among his areas of expertise are complex tax issues, state and local tax issues, voluntary compliance issues, strategic planning, investment policies and organizational tax planning.
Howard is a member of the American Institute of Certified Public Accountants (AICPA), the Washington Society of Certified Public Accountants (WSCPA), the Washington Secretary of State’s Charities Advisory Council and the AICPA Exempt Organization Technical Resource Panel to study tax issues for not-for-profits. He was a past chair of the WSCPA’s Not-for-Profit Committee, Bellevue Schools Foundation’s finance committee and the Bellevue Arts Commission. Howard is a frequent speaker and author on not-for-profit tax issues and is on the Advisory Board of the Exempt Organization Tax Review.