Tax on Nonprofit Employee Transportation Benefits Repealed

The Minnesota Council of Nonprofits (MCN) has been working to repeal a tax on nonprofit employee transportation benefits since it was written into federal law in 2017, and now we have the joy of letting our members know the effort has reached the finish line! On Friday, December 20, President Trump is expected to sign into law H.R. 1865, a package of funding and tax provisions that includes the repeal of this tax.

This is a major victory for the nonprofit sector and is a testament to what we can accomplish when sector advocates and allies work together. We are grateful for our members, who engaged in and support our advocacy work.

For nearly two years, MCN has worked with our national partners, other state nonprofit associations, and our members on this issue. We have met with members of Congress in D.C., sent letters, made calls, emailed, and advocated on social media to explain the harmful consequences of the tax on nonprofit transportation benefits.

The repealed provision in the 2017 tax law imposed an unrelated business income tax (UBIT) of 21 percent on the expenses nonprofits incur for providing employee benefits like transit passes and employee parking. The new law repeals the tax retroactively.

Operations Note: Once enacted, nonprofits that paid the benefits-related unrelated business income tax for Tax Year 2018 will be entitled to a refund of the taxes paid, but not the administrative and accounting expenses incurred in calculating it. While filing amended tax returns is the normal way to claim refunds, the IRS may be convinced to develop an alternative or streamlined approach in the near future. Stay tuned for more information from MCN about how best to apply for a UBIT refund.

Unfortunately, the year-end tax and budget deal left important priorities on the cutting-room floor. MCN’s Minnesota Budget Project weighed in on the importance of expanding tax credits for lower-income families and children, who were largely left out of the 2017 federal tax law. We thank the Minnesota nonprofits who joined us in that effort, and you can count on continued advocacy to advance fair and inclusive federal tax policy in the years ahead.