IRS Instructs Nonprofits on How to Claim Parking Tax Refund

Morgan Lewis
Contact

Morgan Lewis

On December 20, 2019, Congress retroactively repealed Internal Revenue Code (IRC) Section 512(a)(7), which had increased unrelated business taxable income by amounts paid or incurred for qualified transportation fringes. The Internal Revenue Service (IRS) has now provided procedural instructions for nonprofits on how to seek a refund for tax paid under this section prior to its repeal.

Parking Tax Repeal

As reported in our prior LawFlash, Congress enacted the parking tax two years ago as part of the Tax Cuts and Jobs Act (TCJA). The tax was the nonprofit corollary to the deduction disallowance for qualified transportation fringes under Section 274 applicable to taxable employers. The Section 512(a)(7) tax worked by imposing unrelated business income tax on any qualified transportation fringe expenses paid by a tax-exempt employer if such expense would have been nondeductible to a taxable employer under Section 274. Congress repealed the tax retroactively on December 20, 2019, as part of the Taxpayer Certainty and Disaster Tax Relief Act of 2019.

Claiming a Refund 

The IRS recently posted instructions on its website on how nonprofit organizations may claim a refund or credit of unrelated business income tax (UBIT) for qualified transportation fringe amounts. Organizations that paid UBIT under Section 512(a)(7) for 2017 or 2018 may claim a refund or credit of the amount paid by filing an amended Form 990-T for the applicable year. The instructions provide line-by-line guidance on how the amended Form 990-T should be completed depending on the applicable version of the Form 990-T (2017 or 2018), and instructs organizations to attach a statement indicating the line numbers from the original return that were changed and the reason for the change (i.e., “repeal of Section 512(a)(7)”).

The instructions also remind nonprofit organizations that the generally applicable time limits for filing refund claims applies to claims for a refund of tax paid under Section 512(a)(7) — typically, three years from the time the original Form 990-T was filed or two years from the time the tax was paid, whichever is later.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Morgan Lewis | Attorney Advertising

Written by:

Morgan Lewis
Contact
more
less

Morgan Lewis on:

Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
- hide
- hide

This website uses cookies to improve user experience, track anonymous site usage, store authorization tokens and permit sharing on social media networks. By continuing to browse this website you accept the use of cookies. Click here to read more about how we use cookies.