In 2018, the federal government made some changes to its Unrelated Business Income Tax (UBIT) policies. The changes required businesses to pay taxes on certain transportation fringe benefits offered to employees.
The UBIT changes were not popular, and they forced millions of businesses to remit payments on employee perks related to parking and public transportation benefits. American businesses were significantly impacted, and the new UBIT policies had negative effects on commuter programs.
What did the UBIT taxes on transportation fringe benefits cover?
The 2018 changes that introduced UBIT taxes on transportation fringe benefits required companies to pay taxes on benefits related to parking and public transit. For example, companies that covered parking costs or offered free transit passes to commuters had to pay taxes on those expenditures, which were previously tax-free.
As a result, many companies saw their UBIT-related tax bills rise by as much as 21%.
What has changed?
In December 2019, the federal government repealed its UBIT taxes on transportation fringe benefits in response to pressure from businesses and lobby groups. The taxes were very unpopular and were negatively impacting employers’ commuter policies.
How are businesses affected by the changes?
The tax code change is retroactive to 2018, meaning that the companies that paid them qualify for refunds if they are exempt from these taxes under the new rules. If your company paid these taxes and is now exempt from them, be sure to notify your taxation, finance, and legal departments as you are entitled to have your tax payments on transportation fringe benefits returned to you.
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