The provision would be effective for amounts paid or incurred after 2017. This is a companion provision to changes to the deductibility of these benefits for taxable entities. Specifically, the provision would treat the funds used to pay for such benefits as unrelated business taxable income, thus subjecting the values of those employee benefits to a tax equal to the corporate tax rate. The provision would impose tax on tax-exempt entities with respect to transportation fringe benefits, and on-premises gyms and other athletic facilities. In either case, employees may exclude the values of those benefits from their taxable incomes. Taxable entity employers may deduct the costs of such benefits, while tax-exempt entities do not need to deduct those costs.
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Tax-exempt organizations, like taxable entities, may provide their employees with transportation fringe benefits, and on-premises gyms and other athletic facilities, free from income tax at both the employer and employee level. Unrelated business taxable income increased by amount of certain fringe expenses for which deduction is disallowed See also Tax Alert 2017-1831 for a general discussion of the bill's provisions, Tax Alert 2017-1840 for a detailed discussion of the individual provisions, and Tax Alert 2017-1841 for a detailed discussion of the compensation and benefits provisions.Įxempt organizations provisions: unrelated business income tax
In addition, the reforms to the individual, corporate and bond tax systems would affect exempt organizations through their effect on charitable giving, financing of activities and the operation of taxable businesses and deferred compensation plans. Other provisions would simplify private foundation taxation and provide exceptions to business holding limitations and political activity by churches and other houses of worship. Several provisions would likely increase the tax burden on these organizations, such as the changes to the unrelated business income tax and the excise taxes on endowments and compensation. The tax reform bill released by the House Ways and Means Committee on November 2 ( Tax Cuts and Jobs Act) includes many provisions that would directly and indirectly affect tax-exempt organizations. House tax reform bill includes significant changes for exempt organizations
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