The Tax Cuts and Jobs Act (the Act), enacted in late 2017, was the most significant change in the tax law in over 30 years. Several provisions of the Act could have a direct or an indirect impact on not-for-profit/tax-exempt entities (exempt organizations).

There has been much discussion about decreases in individual charitable giving due to changes in itemized deductions and greater applicability of the increased standard deduction for many taxpayers. The impact of these changes on donations to Section 501(c)(3) organizations could be realized by organizations currently and in the near future.

Another change made by the Act is the cost of providing commuter transportation and parking fringe benefits to employees, which is now considered unrelated business income (UBI) to exempt organizations. This change has not created the same level of discussion as the changes to itemized deductions, but could have a material impact on many exempt organizations. The rules became effective on January 1, 2018 for all exempt organizations, regardless of the year-end of the organizations. Many exempt organizations are currently modeling through the potential implications of the new rules, including how increased UBI could impact budgets for 2018 and future years, estimated timing for federal/state UBI tax payments and internal changes in policies and procedures to mitigate the effect of the new provisions.

It should be noted that many details and questions regarding the applicability of the new rules have not yet been addressed by the IRS, although guidance is expected at a later date. RubinBrown is closely monitoring the situation and will provide updates as they become available. If you have any questions regarding the new tax law, please contact one of RubinBrown’s Not-for-Profit or Colleges & Universities Services Group professionals.

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