FIT! TIPS December 29, 2019—Joan M. Renner, CPA, CGMA, Director 501(c)(fit!)
You may have played a few board games with the family over the holidays, but this windfall is real. Nonprofits have just landed on “Free Parking”.
If you worked diligently to comply with the 2017 law that required nonprofits to pay tax on parking and metro benefits—you may have a tax refund coming your way.
Two years ago, the Tax Cuts and Jobs Act required nonprofit employers to treat payments for transportation fringe benefits to employees as unrelated business income and pay unrelated business income tax (UBIT).
Amid what can best be described as disbelief from the nonprofit community, nonprofits complied with the law by filing Form 990-T to pay 21% tax, as well as corresponding state tax, on the total parking and metro benefits they paid to employees during 2018. Many nonprofits have also paid federal and state quarterly estimated tax payments toward a 2019 tax liability that will now not be required.
Congress has retroactively repealed Section 512(a)(7) of the Tax Cuts and Jobs Act effective for amounts paid or incurred after 2017. The repeal was included in the spending bill approved by Congress and signed by the President on December 20, 2019 to avoid a government shutdown.
What nonprofits should do:
- Plan to file for a full refund. File an amended Form 990-T for 2018 to obtain a refund of the repealed tax. Also file amended State returns.
- Don’t forget any 2019 estimated tax payments you have made. Claim them on a timely filed 2019 990T to apply against any UBIT tax you have. If parking tax was your only UBIT, you’ll be getting these payments refunded as well.
- Skip your 2019 fourth quarter estimated payment if parking tax was your only UBIT.
This is late-breaking information to help you plan your 2019 tax payments and get your 2018 refund. More details may emerge from the IRS on how to handle the many amended returns that will be filed. Consult your tax advisor for ongoing details on how Congress’ repeal of the parking tax will apply to you and your specific facts and circumstances.
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