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Advocacy Corner: Week of 04/05/19 Bookmark

Advocacy Corner: Week of 04/05/19

American Associations Day

On March 28-29th, MSAE advocated on Capitol Hill and joined the American Society of Association Executives for American Associations Day.

Association professionals from across the country presented members of Congress and policymakers with a unified message of the power of associations and the means, services, and missions in which they strengthen America, every day. Known as The Power of A, one-third of all Americans are a part of the association community, whether as employees, members, or volunteers.

For more information or to join future Michigan association delegations, contact Taylor Benavente.

Unrelated Business Income Tax

Despite size and structure, mission or purpose, those in the association and nonprofit sectors are equally accountable to – but not equally assessed by – the United States federal tax code; as are their counterparts in the for-profit sector.

In the tax world, organizations which specifically exist to improve our societal wellbeing, to tackle and advance tough issues, faith-based groups, etc. have for the past 70 years been intentionally seen as different from their corporate counterparts – with proportionate tax liabilities, respectively.

Since 1950, the United States has maintained a spirit of competitive-business freedom towards nonprofits and for-profits while still preventing unfair advantages between the sectors. One such prevention measure is the Unrelated Business Income Tax (UBIT).

UBIT is a tax on the income nonprofit organizations receive from business transactions they frequently conduct – but are not directly related their mission or purpose. An example of unrelated business income might be the advertisements an association sells in its weekly newsletter; with that income then being used in support of its core member services and benefits.

Nonprofits conduct this type of business as additional income in support of their “real” work – their organization’s mission or purpose.

However, following the Tax Cuts and Jobs Act (TCJA) of 2017, the nonprofit sector is newly being assessed a tax on nonprofit fringe benefits – things like parking and mass transit assistance – as if they were unrelated business income received by the organization.

The tax is proving to be a huge burden for the nonprofit community and carries implications to the future of the industry. Particularly with concerns to:

  1. The tax itself. On top of the new tax liabilities organizations must now pay (estimated at about $12,000 diverted annually from advancing their mission), this tax on benefits provided to employees is being assessed as if it were unrelated business income when in fact it is an expense to the employer.
  2. Administrative costs of understanding their organization’s compliance within the new tax – or, outsourcing their tax services to outside firms due to either an inability or lack of resources to do so in-house.
  3. Lack of instruction and guidance from the Internal Revenue Service. Nonprofit organizations began making estimated payments on this tax beginning in 2018 without clear guidelines on how to do actually so.
  4. A sense of forced equality between the nonprofit and for-profit sectors. Industry experts note that nonprofits feel a sense of their “picking up the bill” following the 2017 changes to the tax code.

Multiple bills to repeal the nonprofit benefits tax have been introduced in the 116th Congress including H.R. 1545 by Rep. Mark Walker (R-NC) and S. 632 by Sen. James Lankford (R-OK).

For additional information, listen to MSAE’s discussion of UBIT with the Michigan Nonprofit Association and the American Society of Association Executives.

General Data Protection Regulation

Tech industry giants including Facebook and Google continue to see increasing pressure and scrutiny surrounding the developing frontier that is consumer data protection. As the United States’ rules and regulations are sorted out, they draw attention to consumer data laws implemented in Europe as a potential forecast of what might lie ahead.

The General Data Protection Regulation (GDPR), put into effect in May 2018, is a sweeping data protection law that affects all enterprises offering goods or services within the European Union as well as any business retaining or processing information on any European Union citizen.

Although most U.S. associations do not engage at the international level (and are therefore not currently liable to GDPR), industry groups such as ISACA – previously the Information Systems Audit and Control Association – suggest that all organizations become increasingly aware of developments to these data protection regulations.

Whether based abroad or here in Michigan, associations and how they collect, utilize, and maintain their primary knowledge base – their membership data – will be subject to the consequences of these developments. 

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