New Tax Imposed on Nonprofits
Prior to the Tax Cuts and Jobs Act, certain for-profit employers were allowed a tax deduction for the costs related to qualified transportation and parking benefits provided to their employees. However, this deduction was eliminated by the Tax Cuts and Jobs Act. As a result, nonprofits that provide transportation and parking benefits to their employees are now required to treat the value of these costs as unrelated business taxable income. Applicable organizations may have to pay unrelated business income tax (UBIT) on these expenses and file Form 990-T with the IRS. Many are claiming that the flat UBIT of 21 percent for these benefits will place a burden on churches and nonprofits. Therefore, there has been a push to repeal this provision.
100% Bonus Depreciation
The bonus depreciation percentage has increased from 50% to 100%; qualified property purchased and placed in service after September 27, 2017 may now be written off in full. Prior to the Tax Cuts and Jobs Act, bonus depreciation could only be used for new property. However, under the new tax law, bonus depreciation can also be used for purchases of used property. The 100% bonus depreciation is effective until January 1, 2023. After that, it phases out 20% each year as follows:
•80% for property placed in service during the 2023 taxable year.
•60% for property placed in service during the 2024 taxable year.
•40% for property placed in service during the 2025 taxable year.
•20% for property placed in service during the 2026 taxable year.