To the dismay of charities across the country, costs incurred in providing certain commuting and parking benefits to employees now result in a tax payable by the charity (or other tax-exempt organization). This odd tax (for expenses incurred after December 31, 2017) can be found in section 512(a)(7) of the Internal Revenue Code. The tax is framed as a deemed “unrelated business income tax” (or “UBIT”), and the costs that trigger this tax are treated as deemed “unrelated business taxable income” (or “UBTI”). Treatment of these costs as deemed UBTI affects how the taxes are calculated, and what options an organization may have for avoiding or minimizing the tax.
What costs are taxable? Does Massachusetts impose UBIT? Can the tax be avoided or minimized?