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Insights on Taxpayer Certainty and Disaster Tax Relief Act

Taxpayer Certainty and Disaster Tax Relief Act: Insights

On December 20, 2019, the President and Congress signed into law the holiday present the nonprofit sector had been asking for.  The Taxpayer Certainty and Disaster Tax Relief Act, a part of the overall government funding package, retroactively repealed the taxation of transportation fringe benefits to nonprofit employers under §512(a)(7) all the way back to its original effective date. 

Ever since the 2017 Tax Cuts and Jobs Act (“TCJA”) gifted the nonprofit sector the new §512(a)(7) tax provision, there had been a loud, steady outcry.  That provision magically transformed a nonprofit employer’s expense of providing its employees with transportation fringe benefits, such as parking, bus passes and other public transit benefits, into unrelated business income potentially subject to a 21% tax.  The TCJA’s budget-balancing sleight of hand caught nonprofit organizations by surprise with many forced to file an income tax return (Form 990-T) for the first time in addition to their annual information return (Form 990, 990-EZ or 990-N).  Adding insult to injury, this new tax provision also applied to churches that are otherwise not required to file an annual information return, helping to bolster a bipartisan call for repeal.  Nonprofit organizations were sent scrambling, spending 2018 and 2019 revisiting transportation fringe benefit costs and studying the primary uses of their parking stalls.

Fortunately, this repeal is good news.  Organizations that paid unrelated business income taxes on these transportation benefits incurred or paid after December 31, 2017 will be able to claim a refund by amending their affected returns. 

If you have questions about qualified transportation fringe benefits, unrelated business income, or how to amend your organization’s tax returns to claim a refund of transportation fringe benefit taxes paid, SVA’s team of nonprofit tax professionals is here to help.

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