ANCOR submitted comments to the Internal Revenue Service (IRS) on Friday outlining the challenges the unrelated business income tax (UBIT) that tax-exempt organizations pay on unrelated business taxable income (UBTI) poses for non-profits and providers of intellectual / developmental disability (I/DD) supports. This tax, which was part of theTax Cuts and Jobs Act of 2017 (the 2017 tax reform package), is now taking effect and being developed into a regulation by the IRS and includes such benefits as employee parking and transit subsidies. In keeping with the general messaging of the non-profit community on this topic, ANCOR requested that the IRS use its administrative authority to delay implementation of this regulation by one year after promulgation of the regulation. ANCOR also requested that the IRS schedule listening sessions with the community to understand the impact of interpretation of the tax as applied to businesses like I/DD providers. We also created an action alert, which closed on Friday because that was the IRS comment deadline, which allowed members to submit 146 individual comments to the IRS that day (total comments for the entire country are 479).
The challenges to I/DD supports providers which we highlighted in our comments are that:
- Disability supports which are reliant on fixed, non-negotiable Medicaid state and federal reimbursement rates cannot afford additional taxation without government action to increase our rates for services. Most I/DD supports are funded almost entirely by Medicaid.
- Disability supports are staff and transportation heavy - it is our job to get people with significant disabilities in the community to jobs, community events, and daily skills training. Parking and transportation is essential for our staff and the individuals they serve. Imposing a tax on parking and transit benefits could be a decimation of lifeline services.
- Current IRS parking guidance in general has little clarity of application and seems to be overly broad in its interpretation. This generates much confusion for I/DD supports providers, whose services occur throughout the community in a variety of settings, such as grocery stores, banks, doctors’ offices and individuals’ homes – it would not be feasible to account for all those settings to comply with the tax.
ANCOR has long been following this issue – in fact the UBIT provision amendment was one of the reasons we opposed the 2017 tax bill as written. Through our membership with ASAE, which has been leading association-level coalition work on the the UBIT/UBTI tax, ANCOR is also monitoring current Congressional efforts to overturn this specific provision of the 2017 tax reform bill.
We will keep members informed of future opportunities for action.