Comments on UBIT Provision Submitted Amidst Growing Bipartisan Support for Repeal

We have seen a good amount of movement toward repealing two unrelated business income tax provisions from the 2017 tax bill since we released research on their impact on nonprofits last month.

In addition to H.R. 513—introduced by Representative Michael Conaway (R-TX)—Representative James Clyburn (D-SC) recently introduced legislation (H.R. 1223) to repeal the fringe benefits tax this month with 30 original cosponsors. Senator Sherrod Brown (D-OH) introduced companion legislation (S. 501) in the Senate.

Unlike the Conaway legislation, press reports indicate that both democratic bills propose slightly increasing the corporate tax rate in order to offset the lost revenue from repealing this tax.

Independent Sector also recently submitted comments to the Treasury Department in response to a call for comments around the tax on fringe benefits. The comments cite our recent research and request a delay in implementation of this provision.

While they may not be all that exciting, these comments are important to share. Here are a few things you should know about Independent Sector’s comments in response to Notice 2018-99:

1. We hope these comments become irrelevant. It is important to engage with the regulators who are currently tasked with implementing this provision from the 2017 tax law. But ultimately, no amount of guidance or waiver of penalties can fix such an egregious mistake by Congress. The only acceptable outcome is for this Notice—and our comments in response to it—to become irrelevant because Congress has corrected its error and repealed the provision entirely.
2. Regulators have more leeway than they are using. With continued confusion throughout the nonprofit community about how to comply with this new tax, the case for delaying its implementation is strong. While some have raised questions about whether Treasury has the authority to delay, it’s clear that it does and we have provided concrete examples of prior instances of this authority.
3. Legislators are feeling the pressure. In every single meeting on Capitol Hill, congressional staff report that they are well aware of this issue and pushing for a resolution soon. But if we let up, so will they. Please take two minutes today to see our recent research about the impact of this tax and ask your legislators to choose #MissionNotTaxes today.