Expanded UBIT law repealed in the US, big win for social-service organisations

The law required tax-exempt organisations to pay a 21% unrelated business income tax on benefits, such as parking and transportation.

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The American Society of Association Executives (ASAE) won a massive victory when the US Congress repealed a section of a 2017 law that required non-profit organisations to pay tax on providing employee benefits.

The misguided law required associations and other tax-exempt organisations to pay a 21 per cent unrelated business income tax (UBIT) on benefits, such as parking and transportation.

The US president is supposed to sign the official bill on the midnight of 20 December, amidst warnings of a partial government shutdown on the issue.

Once the Bill is enacted in the parliament, the repeal of the fringe benefit tax will be retroactive for taxes that non-profits have paid or accrued since 31 December, 2017.

The same resolution will also take a look at the Cadillac Tax on high cost employer-provided health plans.

The Cadillac tax was enacted as part of the Affordable Care Act and would have imposed a 40 per cent excise tax beginning 2022, on employer-provided health plans that exceed $11,200 for an individual and $ 30,100 for a family.

Over the past two years, many non-profit advocates have highlighted this issue and raised concerns for the tax-exempt community on Capitol Hill.

The ASAE community mobilised after the law was passed and has sustained a continued advocacy and grassroots campaign against unfair taxes. Advocacy efforts have included putting the message across to lawmakers about how expanding the ambit of UBIT to include employee parking and transit costs is an unnecessary burden on the organisations. Instead, they should be allowed to focus their limited resources on the programmes and services that benefit society.

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