Possible Discussion of UBIT: House Holds Hearing on 2017 Tax Reform Law

ANCOR is sharing this article by ASAE, of which we are a member, because the 2017 tax reform law had components that affected non-profits, including providers of supports for people with disabilities. While we do not know what questions will arise during the hearing, one problematic element of the 2017 law that is currently receiving a lot of Congressional interest pertains to changes to how the unrelated business income tax (UBIT or UBTI)  is calculated. ANCOR will be monitoring this hearing in case members of Congress mention this issue. In essence, the new UBIT calculation is leading to a 21 percent tax on “fringe benefits” such as employee provided parking and transportation benefits. ANCOR is vested in this issue and has joined ASAE’s UBIT Coalition because the new tax could have a harmful effect on the recruitment and retention of staff in disability supports. Studies have shown that the new law will on average remove $12,000 annually from a nonprofit’s mission. This would exacerbate an already severe workforce crisis in this sector, which has a national average frontline staff turnover rate of 45 percent per year – this is affecting the stability of supports for people with disabilities who rely on frontline staff to live life like everyone else. Note that the efforts to repeal the UBIT tax in both the Senate and House have been and remain bipartisan.

As written by ASAE:

“The House Ways and Means Committee will hold a hearing March 27 on the Republican tax overhaul of 2017. [ANCOR NOTE: click here to access video of the hearing, which will take place at 10am ET that day.]

House Democrats have criticized the GOP tax law as disproportionately benefitting corporations and wealthy Americans at the expense of the middle class. Ways and Means Committee Chairman Richard Neal (D-MA) has pointed to reports that taxpayers are receiving smaller refunds after filing their taxes this year as evidence that middle-class taxpayers ‘weren’t a priority’ for the Republican authors of the tax law.

The White House and congressional Republicans have defended the tax law as a significant reason why the economy expanded by more than 3 percent in 2018. This week, White House chief economist Kevin Hassett predicted that the nation’s gross domestic product will grow at or above 3 percent for the next five years.

Some economists have warned that stimulus from the 2017 tax cuts will fade and the Federal Reserve has also predicted slower growth for 2019. Hassett said there are some risks to his forecast, but that there is ‘ample room for optimism.’

‘As we run the numbers, there are so many positives that are basically the residual effect of going from being the highest-taxed place on Earth to being an attractive place’, Hassett said.”