“Parking Tax” Repealed for Not-for-Profits

Published January 8, 2020

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On December 20, 2019, legislation was signed repealing the I.R.C. Section 512(a)(7) “parking tax”, an unrelated business income tax (UBIT) for not-for-profit organizations that provide employees with transportation benefits, like transit passes and parking expenses. The “parking tax” was originally imposed under the 2017 Tax Cuts and Jobs Act (TCJA).

Who is affected?

All not-for profit educational, charitable, or religious institutions exempt from tax under Internal Revenue Code Section 501(c)(3). It also exempts not-for-profit civic, governmental, or other nonprofit organizations from paying tax on parking expenses.

How does this affect not-for-profits?

The retroactive repeal of the “parking tax” is a welcome relief to many not-for-profits, as they will no longer owe this tax and will be due refunds of amounts related to this tax that were reported and paid on Form 990-T over the past two years. The IRS has not yet sent guidelines regarding the refund process.

IRS Simplifies Excise Tax on Private Foundations

In addition to the “parking tax” repeal, the private foundation excise tax on investment income was also revised. The IRS adopted a flat rate of 1.39%, instead of the previous two-tier system of 1% and 2%. The new rate will be effective for private foundations for tax years beginning after December 20, 2019.