Not-for-profits Need Changes, Clarity on TCJA Excise, UBIT Provisions

CUNA is concerned about the treatment of not-for-profit employers in several provisions of the Tax Cuts and Jobs Act (TCJA) and called for parity in a letter to the House Ways and Means Committee Wednesday. The committee conducted its hearing on the aftermath of the TCJA, which was signed into law in 2017.

While the TCJA did not make any alterations to credit unions’ tax status, the result of CUNA and state league advocacy throughout the process, it imposes several taxes on not-for-profit entities.

One provision requires tax-exempt organizations to pay a 21 percent excise tax on the five highest paid employees’ compensation that individually exceed $1 million per year. Contracts in place at for-profit entities before Nov. 2, 2017 are exempt, but no such exemption exists for not-for-profits.

“This amounts to a retroactive tax on the nonprofit sector as these contracts were agreed upon with certain tax considerations assumed,” the letter reads. “CUNA and the nonprofit sector are deeply concerned about this lack of parity."

CUNA also expressed concerns about a TCJA provision that extends Unrelated Business Income Tax (UBIT) to certain employee fringe benefits, most notably parking and transportation benefits. CUNA calls for a delay in this provision until stakeholders are provided with complete, details instructions on how to file.