Public Policy Alert!!!

IRS Issues Guidance for Reclaiming Transportation UBIT Payments

On Wednesday, January 22, 2020, the IRS issued guidance that will help nonprofits quickly get back taxes paid on the now-repealed tax on nonprofit transportation benefits: How To Claim a Refund or Credit of Unrelated Business Income Tax (UBIT) or adjust Form 990-T for Qualified Transportation Fringe Amounts.

You may recall that late last year, the Nonprofit Association of Oregon (NAO) asked our members to contact Congressman Earl Blumenauer (D-OR) who sits on the House Ways and Means Committee about this unfair and unnecessary tax. In January, Committee Chair Neal (D-MA) and Oversight Subcommittee Chair Lewis (D-GA) sent a letter to the IRS Commissioner asking the Service to create an expedited process so nonprofits can quickly secure refunds. The news release stated: “Congress did our part to right this wrong – now it is time for the IRS to provide tax-exempt organizations with the guidance they need to claim and receive the refunds they are due.” 

The guidance that just came out instructs eligible nonprofits to:

It is important that the IRS alerted nonprofits and their own staff to the need for speed on this.

NAO partnered with our members, other state associations and the National Council of Nonprofits to call for the repeal of this burdensome tax on nonprofits and we did it together!

In a statement to reporters, Tim Delaney of the National Council of Nonprofits wrote: “Although hard-fought to get here, this now is a beautiful thing to see: Congress – on a bipartisan basis – retroactively repealed the transportation tax, and the IRS – barely a month later – put out clear guidance to help nonprofits get their money back. For the past 21 months, charitable organizations persistently objected to the unfair diversion of dollars from missions to pay the tax. Today’s guidance is much appreciated because nonprofits need to get this money where it belongs – in local communities addressing local challenges.”

OMB Proposes Regulations to Improve Uniform Guidance Indirect Cost Rules

The federal rules governing grants to nonprofits would be substantially improved under proposed revisions to the Uniform Guidance published today by the U.S. Office of Management and Budget. Most notably, the proposed revisions to the OMB Uniform Guidance would strengthen the guarantee that grantees receive reimbursement of indirect costs of at least 10 percent of their modified total direct costs (de minimis rate). The draft also clarifies that all granting agencies paying nonprofits with federal funds – whether federal, state, or local governments, native tribes, or other nonprofits – must pay nonprofits using the nonprofit's existing negotiated indirect cost rates and, if no negotiated rate exists yet, then they have the obligation to negotiate rates, at the option of the nonprofit.

To date, various granting agencies have misinterpreted the rules in ways that deny nonprofits' rights under the Uniform Guidance. In other changes, the proposed rules would provide greater flexibility under procurement standards, implement standard data elements across agencies and grants, promote the collection of data in machine-readable formats, and strengthen end-of-grant closeout procedures and enforcement. 

The public is invited to review the proposed regulations and submit comments by March 22, 2020. Read the National Council of Nonprofits' analysis of the proposed regulations.

Adapted from materials prepared by the National Council of Nonprofits