CUNA Calls for UBIT Repeal, Executive Salary Excise Tax Parity

CUNA backed a bill Wednesday with language repealing an unrelated business income tax (UBIT) on certain fringe benefits for not-for-profits. The House Ways and Means Committee is expected to mark up the Economic Mobility Act of 2019 (H.R. 3300), which contains the UBIT repeal language.

The Tax Cuts and Jobs Act of 2017 (TCJA) extends the UBIT to certain employee fringe benefits, requiring tax-exempt organizations currently subject to UBIT to pay effectively 21% on certain employee fringe benefits, namely transportation and parking benefits. 

“The definitions and IRS guidance regarding this [UBIT] provision is severely lacking in substance and clarity.  Thus, CUNA strongly supports a repeal of this provision of the TCJA as furthered by Section 401 of the Economic Mobility Act of 2019,” wrote CUNA President/CEO Jim Nussle. “Further, some cities, including Washington, D.C., New York, and San Francisco, have mandated employer-provided pre-tax mass transit benefits.  As a result, employers in those cities cannot avoid the new tax.”

CUNA also brought attention to another TCJA provision that imposes a 21% excise tax on certain executive compensation provided by tax-exempt organizations. CUNA is concerned with the lack of parity between for-profit and not-for-profit employers, as for-profit executive contracts in place before Nov. 2, 2017 are grandfathered in and exempt from the tax. No such exemption exists for not-for-profit employee contracts.

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

The committee’s markup is scheduled to begin at 9:30 a.m. today.

CUNA also sent letters to the Hill this week prior to hearings on Beneficial Ownership , Board Diversity, and the Appraisal Industry.