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The federal Tax Cut and Jobs Act of 2017 imposes federal Unrelated Business Income Tax (UBIT) on any amount a non-profit employer has “paid or incurred” for commuter benefits. This would include things such as NYC Metrocards, Buffalo NFTA Metro Pass, etc., that a non-profit provides to commuting employees, as well as paying for employee parking. New York state law imposes a state UBIT whenever federal law does so. As a result, New York will automatically follow the new federal statute, imposing an additional 9% tax on non-profits that will be effective January 1, 2018.

Several New York State non-profit organizations are banding together to rally support to amend the law, sighting that this will be an overly burdensome tax on non-profits. The Fiscal Policy Institute, Human Services Council, Lawyers Alliance for New York, New York Council of Non-Profits, Non-Profit Coordinating Committee of New York, and the UJA Federation NY, have all signed a memo, stating their support for the passage of two state bills, S.8831/ A.11051, which would amend the New York State Tax Law to correct an unintended new tax placed on NY non-profits. According to the memo, “Without such a correction, non-profits may be subject to millions of dollars in taxes in 2018, diverting critical funds from the services non-profits provide to communities throughout New York.”

The organizations go on to say that, “The work performed by not-for-profit employees, and the compensation paid to them, including transportation benefits, certainly advances the purposes and mission of the not-for-profit.” Area non-profits were not budgeted for, nor prepared to, pay both the federal tax and the 9% New York tax on employee commuter benefits. Doing so would stretch already limited budgets, and lead to a drop in much needed services to the communities they serve.

The proposed bills would uncouple the NY State UBIT tax from the federal UBIT tax, and allow non-profits to subtract these costs from federal unrelated business taxable income. If you are a non-profit doing business in New York, and would like to help pass this legislation, you are urged to email, write a letter, or call your elected representatives and key leaders (listed below).

Majority Leader John Flanagan:; 518-455-2071

Senator John DeFrancisco:; 518-455-3511

Senator Martin Golden:; 518-455-2730

Senator Joseph Robach:; 518-455-2909

Senator James Seward:; 518-455-3131

Senator Terrance Murphy:; 518- 455-3111

Assembly Member Gottfried:; 518-455-4941

Assembly Member Nolan:; 518-455-4851

Assembly Member Ortiz:; 518-455-3821

Assembly Member Weinstein:; 518-455-5462

Assembly Member Paulin:; 518-455-5585

Assembly Member Morelle:; 585-467-0410

Assembly Member Colton:; 518-455-5828

Understanding all of the implications for non-profits of the Tax Cut and Jobs Act of 2017, can be quite complex. If you would like to benefit from our expertise in these areas or if you have further questions on this Advisory, do not hesitate to contact our Non-Profit specialists, or call us at 1-800-239-1474.