Recently passed legislation will benefit nonprofit organizations by repealing an unpopular unrelated business income tax (UBIT) on expenses of nonprofits that provide transportation fringe benefits to their employees.
The “Parking Tax,” which was imposed under I.R.C. Section 512(a)(7) upon enactment of the 2017 Tax Cuts and Jobs Act, has now been retroactively repealed under the Taxpayer Certainty and Disaster Tax Relief Act.
The legislation was signed into law on Dec. 20 as part of a larger appropriations bill.
The 2019 Act retroactively repeals the highly contested unrelated business income tax on tax-exempt organization disallowed fringes – as if it never existed. This means nonprofits no longer owe this tax and will be due refunds of amounts related to this tax, which were reported and paid on Form 990-T over the past two years.
The 2019 Act also simplifies the private foundation excise tax on investment income by replacing the two-tier system (1% and 2%) with a flat rate of 1.39%. The new rate is effective for tax years beginning after Dec. 20, 2019.
Nonprofits who have questions about this legislation can contact Zinner and Co.’s expert nonprofit team.