We are here once again to update you on recent tax law changes related to the Form 990-T and the Qualified Transportation Benefits Tax. These fringe benefits allow employees and employers to receive benefits in the form of transit passes that allow for mass commuting, qualified parking, and bicycle commuting reimbursement if qualified.
You may recall our March 2018 and February 2019 newsletters, where we explained tax law changes that may have caused your organization to need to file a Form 990-T for the first time during the 2018 tax period.
When the Tax Cuts and Jobs Act (TCJA) was passed in late 2017, one of the changes that affected nonprofit organizations directly was the enactment of Internal Revenue Code 512(a)(7), requiring exempt organizations to report Unrelated Business Taxable Income on Form 990-T for the amounts paid or incurred for qualified transportation benefits provided to employees (including parking and public transportation benefits). The effective date for this tax was January 1, 2018.
Independent Sector estimated that the transportation tax and associated administrative cost likely impacted nonprofits by an average of $12,000.
On December 20, 2019, the Taxpayer Certainty and Disaster Tax Relief Act was passed, repealing the Qualified Transportation Benefits Tax imposed by Internal Revenue Code Section 512(a)(7). The repeal is retroactive to the implementation date of January 1, 2018, so nonprofit organizations that had filed a 990-T and paid the tax can now apply for a refund from the IRS.
Currently, refunds can be requested for fiscal and calendar years ending in 2018 by filing the Amended Form 990-T for 2017 and/or 2018 and writing “Amended Return – Section 512(a)(7) Repeal” at the top of the form.
You’ll find detailed instructions on how and when to apply for a refund of the tax paid for Qualified Transportation Benefits on the IRS website.
The AICPA Exempt Organization Technical Resource Panel (AICPA EOTRP) is working with the IRS for a simpler way for exempt organizations that filed a 990-T with only Qualified Transportation Fringe Benefits income to receive their refunds, but currently the Amended 990-T is the only method the IRS has given instructions on.
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