By Chai Jindasurat, Policy Director at the Nonprofit Coordinating Committee of New York
May 15, 2019
When most people think about nonprofits, taxes aren’t the first thing that comes to mind. After all, nonprofits are tax-exempt organizations because they take care of communities. Our work is to feed people, bring arts and culture to our cities and towns, to be houses of worship - and so much more. Nonprofits do not make a profit on this work for the public good, and therefore don’t pay taxes on it. Today, that changes. NPCC is joining nonprofits across the country in recognizing May 15th as Nonprofit Tax Day.
Today, tax-exempt organizations must pay significant new taxes to the federal government. That’s because the new federal tax law imposes tax liabilities on charities, houses of worship, and other nonprofits in order to generate revenue and offset the corporate tax cuts in the 2017 Tax Cuts and Jobs Act. These taxes are new, and they are hefty - an estimated $2.1 million for taxes and another $200,000 for the administrative expenses for filing them.
Perhaps the most illogical new tax on nonprofits is the new 21-percent unrelated business income tax (UBIT) on expenses nonprofits incur providing employees transportation fringe benefits, such as metro cards, bus, and parking passes. Nonprofits will have to pay taxes on the entire benefit, simply for offering it, even if they don’t pay a cent toward the cost of the benefit. (Yes, you read that right.) Most nonprofits want to offer this benefit. It helps retain good workers, and provides underpaid nonprofit employees with a critical benefit. But even if they didn’t want to, in New York City and other cities across the country, local law requires employees, including nonprofits, with 20 or more employees to provide this benefit. So there is no way to avoid this unexpected, unbudgeted, and expensive new cost.
We’ve done a lot to fight against this unfair treatment of nonprofits. NPCC, with a coalition of other nonprofit advocates, successfully passed a state fix that de-coupled this tax. Even with this victory, nonprofits in New York still have to pay this new tax to the federal government. So we need to do more. We need to repeal this tax at the federal level.
And we’re making progress there. In response to this unfair and burdensome tax, in March at NPCC’s offices, Congresswoman Carolyn B. Maloney announced her support of its repeal and for additional relief for nonprofits. Other Congressional bills have been introduced to repeal the transportation UBIT, and other harmful provisions of the federal tax law. And more than 600 tax-exempt organizations wrote Congress calling for the law’s repeal.
We will continue this fight. But - right now - for many nonprofit organizations, May 15th is the beginning of a new era of financial burden that will take resources from the programs that millions of people rely on every day. We are not powerless. We can, and must, urge Congress to listen to their constituents and repeal these new taxes so that nonprofits can dedicate their resources to the public good and strengthening our communities. Join us in doing this so that we can create a new date - one on which nonprofits once again can dedicate all of our resources to the work of the public good.