Parking Tax Repealed and Tax Burden Lifted for Non-Profits

On December 20, 2019, President Trump signed into law the “Further Consolidated Appropriations Act of 2020.” One of the long-awaited provisions of the act effectively strikes Section 512 (a)(7) from the Internal Revenue Code, which disallowed deductions for employers who provide commuting fringe benefits for employees, such as:

  • Employer sponsored van pools
  • Any transit pass, token, fare card, voucher or similar item to be used by an employee for commuting
  • Qualified parking – Parking provided to an employee on or near the place of business or on or near the location from which the employee commutes to work. The disallowance was applicable whether paid to a third party or provided on the premises where the employer owns or rents.

History

Prior to the Tax Cuts & Jobs Act (TCJA), not-for-profit and for-profit organizations could provide certain transportation benefits to employees that were excluded from tax, up to a stated monthly amount, and deductible by the organization.  The tax exclusion remained, indexed for inflation, but the transportation fringe benefit deduction was eliminated, and the disallowed expenses were to be added to unrelated business income.

The tax was to be calculated at 21%, the same as the new “C” corporate rate.  The effective date was January 1, 2018.

Now

For many exempt organizations, having to accumulate additional information and incur additional accounting fees, along with a new income tax liability, became a hardship.

The new legislation now reverses the unintended tax burden on exempt organizations and takes away the additional reporting requirements on religious and other exempt organizations that never had to pay taxes in the past.   Organizations will be allowed to file amended returns to request refunds for taxes paid on 2017 and 2018 form 990-T.

For 2019 estimated taxes already paid, guidance is forthcoming on how to request refunds.


Sax’s Not-for-Profit Practice will continue to update you on relevant updates as they emerge.  If you have any questions, please reach out to a Sax advisor at (973) 472-6250 or contact Marqus White, Tax Partner within Sax’s Not-for-Profit Practice at [email protected].