The Consolidated Appropriations Act, 2020 (H.R. 1865) (the Act) was signed into law on December 20, 2019. The Act includes extensions to over 30 expired tax provisions, repeals three Affordable Care Act tax provisions and modifies some of the 2017 Tax Cuts and Jobs Act (TCJA) provisions. Among the provisions is some relief for what had become widely known as the “parking tax” for exempt organizations.
Repeal of the Parking Tax
The Act repealed 512(a)(7), the provision of the TCJA which imposed an unrelated business income tax on charitable organizations for expenses related to providing employees with transportation benefits, including parking. The repeal is effective from the time it was enacted (December 22, 2017), allowing nonprofit organizations to amend their returns or a request a refund if taxes have been paid related to 512(a)(7). There has been no guidance from the IRS regarding a refund process, but one is expected.
Other Provisions Affecting Nonprofit Organizations
The Act also simplified the Section 4940 excise tax rate paid by private foundations on their net investment income. Previously, the rate was 2% but could be reduced to 1% through certain calculations based on the fair market value of the assets held and the charitable distributions made. It has now been replaced by a single 1.39% rate.
If you have any questions, please do not hesitate to reach out to the BSSF Nonprofit Group.