On December 20, 2019, President Trump signed the Taxpayer Certainty and Disaster Tax Relief Act of 2019 (the “Act”) as part of the spending legislation to fund the government for the 2020 fiscal year. This Act also included a welcomed gift for nonprofits organizations: a repeal of the infamous “parking tax”!
Specifically, Section 512(a)(7) of the Internal Revenue Code was enacted in 2017 as part of the Tax Cuts and Jobs Act (i.e., tax reform legislation). This Code section required nonprofit employers to include the expenses attributable to employer-provided parking as unrelated business taxable income. Obviously, this provision created significant confusion and angst in the tax-exempt sector since the tax was imposed on an expense rather than income, which generated an unanticipated tax liability for many nonprofits.
The repeal of the “parking tax” is retroactive, as if the provision had never been enacted in the first place. Thus, tax-exempt organizations that have paid the tax in prior years are now eligible to file amended returns to claim a refund. The expectation is that the IRS will publish additional guidance regarding the refund process, and we will be sure to keep you posted.