Tax Law Revision To Benefit North-Central Connecticut Nonprofits

WASHINGTON, DC — Two members of the state's congressional contingent said that nonprofit organizations in north-central Connecticut are in much better shape tax-wise in 2020.

U.S. Reps. Joe Courtney (CT-02) and John Larson (CT-01) on Wednesday released copies of letters they wrote to Connecticut nonprofit and religious organizations to say that a major "tax provision hurting nonprofits," including churches, synagogues, and other faith-based groups, has been repealed.

In December 2019, the House passed and the President signed into law the Taxpayer Certainty and Disaster Relief Act of 2019 (H.R. 3301). H.R. 3301 contains a provision to repeal the "unrelated business income tax (or UBIT)" levied against religious and nonprofit organizations as part of the 2017 Tax Cuts and Jobs Act.

U.S. Rep. Joe Courtney (right) and U.S. Rep. John Larson (Courtney Photo)

Following enactment of the 2017 Tax Cuts and Jobs Act, a UBIT was imposed on religious and nonprofit organizations, which required them to pay a 21 percent tax on parking and transportation benefits provided to their employees. The new tax placed an "enormous burden" on many religious and nonprofit organizations in Connecticut, which were forced to "divert resources away" from their missions to towards paying for the UBIT.

In their letter to faith and community leaders across Connecticut, Courtney and Larson highlighted the benefits of repealing the UBIT through H.R. 3301, and noted that many organizations who paid a UBIT in 2018 and 2019 will be entitled to a refund. The members wrote, in part:

"[…] the Tax Cuts and Jobs Act, imposed a new tax on nonprofits, including religious organizations, which required nonprofits to pay a 21% UBIT on parking and transportation benefits provided to their employees. This tax has been an enormous burden to many nonprofit and religious organizations in Connecticut.

"Fortunately, there is good news. The Taxpayer Certainty and Disaster Tax Relief Act of 2019 was signed into law in December and contained a provision repealing the UBIT on parking and transportation benefits. The repeal applies retroactively to the 2018 and 2019 tax years and repeals the tax for future years as well. We voted in strong support of the legislation included in this important tax repeal when it was considered in the House in December and are glad that nonprofits throughout the country are no longer required to pay this arduous tax.

"As a result of this repeal, nonprofits and faith groups that were being taxed on employee benefits can now use their precious resources towards the mission of their organization. Tax-exempt organizations, such as churches, synagogues, and charitable organizations, provide enormous benefits to our communities and should never have been taxed on these benefits in the first place."

Both Rep. Courtney and Rep. Larson voted in December to pass the Taxpayer Certainty and Disaster Relief Act of 2019.

A copy of the full letter can be viewed online.