Albany, NY – Assemblymember Amy Paulin (D-Scarsdale) announced that her bill (A.11051 / S. 8831) to prevent an unintended new state tax for unrelated business taxable income on not-for-profit companies, which was inadvertently created by recent changes made in the Federal Internal Revenue Code, passed the New York State Senate at the end of the legislative session in June. Since it had previously passed the Assembly, it will now proceed to Governor Andrew Cuomo for his signature or veto.

“Not-for-profit companies perform critical, mission-driven work throughout our state, and these employers often rely on commuter benefits to help recruit the best employees,” said Assemblymember Paulin. "New York State did not intend this tax hike, nor did we count the potential new income in our FY 2018-2019 budget. If we do not act to prevent it, too many not-for-profit companies will have fewer funds to serve New Yorkers, many will have a harder time making ends meet, and some will undoubtedly be forced to close."

When Congress passed and the president signed the federal tax cut bill at the end of 2017, there were a number of changes affecting not-for-profit businesses. Beginning in 2018, the federal tax code changed the treatment of the amount paid or incurred by non-profits for commuter benefits for their employees, including mass transit, commuter costs, and parking fees. Such costs are now subject to the unrelated business taxable income (UBIT) assessment. Since state tax law is tethered to federal tax law on UBIT, this would have amounted to an unintentional 9% state tax on these benefits as well, potentially diverting millions of dollars from non-profit companies.

Assemblymember Paulin’s bill separates federal tax law from state tax law on the specific category of the money paid for these employee commuter benefits.

Throughout the legislative session, Assemblymember Paulin championed a number of additional policies to ameliorate the more punitive effects of the federal tax bill, especially the new cap on the deduction for state and local taxes, including both income and local property taxes, of $10,000. This has a disproportionate impact in Westchester County, which has the highest property taxes in the nation. Most of the Assemblymember’s proposals, including the decoupling of itemization and allowing counties, municipalities, and school districts to establish charitable funds, were passed as part of the FY 2018-2019 budget. This standalone bill was the final piece of Paulin’s tax reform agenda for the year.

“Particularly for workers in the Greater New York City area, benefits from your employer to defray the cost of public transportation or other commuter costs are essential,” said Assemblymember Paulin. “Preventing this unintended tax is the right thing to do for employees, for non-profit employers, and for the New Yorkers who rely on the vital work done by our not-for-profit sector.”