01 February 2019

Caught Our Eye: The Latest Scoop on the Tax Bill, New Study Shows Cost of UBIT for Charities

One of the biggest questions that will be addressed during this tax season is how the implementation of the Tax Cuts and Jobs Act will affect average Americans. As you know, tax policy can be a difficult issue to navigate. Luckily, Richard Rubin and Heather Seidel of the Wall Street Journal produced a “cool” video to help explain the potential impact of the new tax law.

As Rubin explains, more Americans will opt for the four scoops of vanilla, that is opt for the expanded standard deduction, which means fewer taxpayers will be eligible for the charitable deduction. The question as to how this will affect charitable donations likely won’t be answered for years to come. What we do know is that the charitable deduction certainly impacts both the timing and size of charitable gifts. So, it is easy to see why the nonprofit sector is nervous about how this could play out.

In related news about the new tax law and charities, the Chronicle of Philanthropy reported on a new study from Independent Sector, the Urban Institute and George Washington University discussing the impact of the unrelated business income tax (UBIT) on charities.

A new tax on transportation fringe benefits that some charities offer their employees will cost an average of $12,000 per nonprofit, prompting some to consider ending those perks, according to a new study.

The provision, included in the 2017 Tax Cuts and Jobs Act, requires nonprofits to pay a 21 percent federal tax on the cost of employee transportation benefits, including transit and parking passes.

A separate accounting provision in the law would add $15,000 in compliance costs per nonprofit, according to the study.

While UBIT is not a specific focus issue of ACR, it is something we are watching as it would affect the ability of charities to provide services. You can read the entire study on UBIT here.