Navigating the Possibility of Incurring UBTI
Nonprofit organizations that provide employee parking benefits may be surprised to learn that they may be subject to incur unrelated business taxable income (UBTI). In addition, organizations with no UBTI may now be required to file form 990-T.
The Tax Cuts and Jobs Act (Act) amended Section 274 of the Internal Revenue Code (IRC) to disallow for-profit employers from deducting certain expenses related to transportation fringe benefits provided to their employees. The Act added IRC Section 512(a)(7) to what constitutes UBTI for nonprofits and other tax-exempt entities. The Act states that tax-exempt entities are required to increase their UBTI by expenses related to transportation fringe benefits provided to their employees. The transportation fringe benefits subject to this tax include expenses associated with: