Recent legislation resulted in a repeal of the “parking tax” and simplified the excise tax on private foundation net investment income.
The Internal Revenue Service published the following update to inform tax-exempt organizations about recent tax law changes.
The Taxpayer Certainty and Disaster Tax Relief Act, passed on December 20, 2019, includes provisions that may apply to tax-exempt organizations’ current and previous tax years.
Repeal of “parking lot tax” on exempt employers
This legislation retroactively repealed the increase in unrelated business taxable income by amounts paid or incurred for certain fringe benefits for which a deduction is not allowed, most notably qualified transportation fringes such as employer-provided parking. Previously, Congress had enacted this provision as part of the Tax Cuts and Jobs Act, effective for amounts paid or incurred after December 31, 2017.
Tax-exempt organizations that paid unrelated business income tax on expenses for qualified transportation fringe benefits, including employee parking, may claim a refund. To do so, they should file an amended Form 990-T within the time allowed for refunds. More information on this process can be found at IRS.gov.
Tax simplification for private foundations
The legislation reduced the 2% excise tax on net investment income of private foundations to 1.39%. At the same time, the legislation repealed the 1% special rate that applied if the private foundation met certain distribution requirements.
The changes are effective for taxable years beginning after December 20, 2019.