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Action Alert

 

 

 

 

August 9, 2018

Support the Lessening Impediments from Tax (LIFT) for Charities Act (H.R. 6460)

Colleagues,  

For years, many nonprofit employers, like Federations and Jewish agencies, have provided transit benefits to their employees as a tax-free or tax-advantaged fringe benefit.

The recent tax reform bill, The Tax Cuts and Jobs Act of 2017, provides that, effective January 1, 2018, taxable employers may no longer deduct the value of those transportation fringe benefits as a business expense and nonprofit employers that provide transportation fringe benefits to their employees must report and pay tax on the value provided as “unrelated business income.” The application of what is called an “unrelated business income tax” (UBIT) on the portion of a charity’s payment for transportation fringe benefits attempts to “level the playing field” between taxable and nontaxable employers. The IRS recently stated that, even employers who pay for transportation fringe benefits via pre-tax dollars through Compensation Reduction Agreements (CRAs) will have to pay UBIT based on the amount included in the employee CRAs. The federal tax will be imposed at the 21 percent corporate tax rate and state income taxes could also apply. However, this new tax could represent a substantial unbudgeted financial burden on Federations and agencies, especially in urban areas, where the value of transportation fringe benefits, such as paid-employee parking, transit passes, and other transit benefits, is significant.

Congress can fix this by passing the Lessening Impediments from Tax (LIFT) for Charities Act (H.R. 6460).

Please contact your members of Congress and urge them to pass this legislation repealing the unfair tax on charities that provide qualified transportation fringe benefits to their employees. The House version of H.R. 6460 was introduced by Rep. Mark Walker (R-NC) and a companion bill will be introduced soon in the Senate by Sen. James Lankford (R-KS). 

In addition to advocacy on Capitol Hill, JFNA, along with numerous national charities and other non-profits, has raised objections with the Treasury Department to both the new law, as well as the IRS interpretation of CRAs. Leaders in Congress are also asking Treasury to intervene and provide immediate relief.

For further information, please contact Steven Woolf, Senior Tax Policy Counsel at (202) 736 –5863 or steven.woolf@jewishfederations.org.

Best,

William C. Daroff
Senior Vice President for Public Policy &
Director of the Washington Office 

 

 

 

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