Tax Alert | Not-for-Profit Industry Group

Repeal of the Unrelated Business Tax on Qualified Transportation Fringe Benefits, including Parking

On December 20, 2019, President Trump sign into law the bi-partisan 2020 Government Funding Legislation which included a provision to repeal Section 512(a)(7) of the 2017 Tax Cuts and Jobs Creation Act.  Section 512(a)(7) had required organizations to pay tax on unrelated business income on any amounts paid for qualified transportation fringe benefits, including expenses related to parking facilities used in connection with qualified parking.

The legislation also includes a provision to make the change retroactive, to the date of enactment of the Tax Cuts and Jobs Creation Act. Organizations that previously paid this tax can file an amended Form 990-T to receive a refund of the previous paid taxes.

Private Foundation Net Investment Income Excise Tax Change

The Bi-Partisan 2020 Government Funding Legislation also adjusted Section 4940, for Private Foundations, to implement a single excise tax rate of 1.39% on net investment income and eliminated the dual tax rate system of 1% or 2%.  In the past the tax rate was determined based on the private foundation annual charitable purpose distributions.  The rate change will be effective for tax years beginning after the date of enactment of December 20, 2019.

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Christopher M. Pekula, Director, Tax Strategies and Not-for-Profit Tax Specialist

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