The government funding legislation signed into law on December 20, 2019, included the repeal of Internal Revenue Code Section 512(a)(7), commonly referred to as the “parking tax” provision.
This provision, enacted as part of the 2017 Tax Cuts and Jobs Act, required tax-exempt organizations to include in unrelated business income the amounts paid for qualified transportation fringe benefits, including parking, provided by nonprofit organizations to their employees. This caused some nonprofit organizations to file Form 990-T and pay UBIT (unrelated business income tax) for the first time.
The repeal of this provision is retroactive to the original date of enactment. As a result, organizations are entitled to a refund of any taxes paid since January 1, 2018, relating to this and may now wish to amend these prior tax returns to claim refunds.
A couple of other favorable changes included in the legislation are (1) changing the Section 4940 private foundation excise tax on net investment income from a two-tier tax rate structure of either 2% or 1%, to a flat 1.39% tax rate, effective for tax years beginning after the legislation’s date of enactment, and (2) a temporary suspension of the percentage of income limitations for qualified contributions to publicly supported charities to support disaster relief efforts, subject to limitations and applicable to donations made during the period beginning on January 1, 2018, and ending 60 days after the date of enactment.
If you have any questions regarding these or other changes resulting from the recent legislation, please feel free to contact us.