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Update - UBTI Changes to the Tax Cuts and Jobs Act (TCJA) Impacting Tax-Exempt Organizations

December 13, 2018
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As we discussed in a previous Not-for-Profit Tax Article, the TCJA will have long-lasting implications on tax-exempt organizations. In particular, a number of revisions were made to the unrelated business taxable income (UBTI) rules, which must be appropriately contemplated and planned for by tax-exempt organizations. However, the TCJA did leave many unanswered questions regarding the application of these provisions. New York State and the Internal Revenue Service (IRS) recently provided additional guidance to shed light on some of these questions.

New York State Legislation 

Governor Cuomo recently signed legislation (S.08831/A.11051) to decouple New York State law from the new federal UBTI provision on tax-exempt organization’s employee expenses for transportation benefits. This legislation ensures that New York State tax-exempt organizations will not be required to pay the State’s 9% unrelated business income tax, with respect to the tax-exempt organization’s employee expenses for transportation benefits. A link to the press release may be located at the following site: https://www.governor.ny.gov/news/governor-cuomo-signs-legislation-protect-non-profits-federal-tax-hike.  

Additional Guidance from the IRS

The IRS also released Notice 2018-100, which provides transitional estimated tax penalty relief to tax-exempt organizations that are now required to pay UBTI on certain employee transportation fringe employee benefits. However, this relief is only available to tax-exempt organizations that were not required to file Form 990-T for the previous tax year and requires timely compliance with their payment of the tax due for the current tax year.  

How we can help

Citrin Cooperman’s Not-for-Profit practice professionals can assist you in further understanding the TCJA Impact to your organization, as well as the recently-released guidance enacted. As always, any additional guidance that is provided by the IRS and/or other states regarding such matters will be made available on Citrin Cooperman’s Not-for-Profit webpage.