Letter supports Section 401 of H.R. 3300, which would retroactively repeal the transportation fringe benefits tax on nonprofits and places of worship
(WASHINGTON, June 20, 2019) – Independent Sector submitted a letter to the House of Representatives’ Ways and Means Committee in support of a provision in H.R. 3300, the Economic Mobility Act of 2019, that would repeal the transportation fringe benefits tax. This is one of two unrelated business income tax (UBIT) provisions created in 2017 that have cost nonprofits thousands. The legislation is expected to be marked up by the Committee today.
In partnership with researchers at the Urban Institute and the George Washington University, Independent Sector conducted a survey of more than 700 nonprofit organizations and found that the tax on transportation fringe benefits would divert an average of about $12,000 away from each nonprofit’s mission per year. The survey also found that as a percentage of budget size, this tax is a bigger burden to smaller nonprofits. About 10 percent of nonprofits reported that they are considering dropping these benefits entirely.
In the submitted letter, Independent Sector President and CEO Daniel J. Cardinali wrote:
“Unlike many for-profit organizations, nonprofits cannot simply pass along these increased costs to the communities they serve. They instead are being forced to curtail their services. It is an outrage to see financial resources on such a grand scale being directed away from charitable missions, but it also is extremely concerning to note what some organizations are being forced to resort to in order to avoid these taxes. Nonprofit organizations already struggle to compete for talented employees with for-profit companies, and a charitable sector that stops offering employee benefits will be at an even greater disadvantage.”
In addition to citing the diversion of nonprofit resources, Independent Sector believes this UBIT provision should be repealed retroactively because it a misapplication of UBIT’s purpose, undercuts the stated purpose of job growth from the 2017 tax law, and imposes mandatory taxes due to local requirements.
While the bill does not specifically address another UBIT provision of reporting unrelated income streams separately, Independent Sector’s research also found that this “siloing” provision would redirect an additional $15,000 per year away from the mission-related work of each affected nonprofit organization.
Independent Sector will continue to work with policymakers to urge repeal of these provisions.
Independent Sector is the only national membership organization that brings together a diverse community of changemakers, nonprofits, foundations, and corporations working to ensure all people in the United States thrive. Learn more at independentsector.org.
Kristina Gawrgy Campbell