In December of 2019, Congress enacted the Taxpayer Certainty and Disaster Tax Relief Act of 2019 which retroactively repealed Internal Revenue Code Section 512(a)(7), which increased unrelated business taxable income by amounts paid or incurred for qualified transportation fringes.
As you recall, IRC Section 512(a)(7) was effective January 1, 2018 and imposed a 21 percent federal tax rate on tax-exempt entities who provided certain parking or transportation benefits to its employees.
So, what does the repeal mean if your organization filed a Form 990-T, Exempt Organization Business Income Tax Return? And, more importantly, how do tax-exempt entities get the amounts paid for 2018 and estimates paid for 2019 to the government refunded?
Organizations no longer need to file a 990-T if they were solely filing for the ‘parking tax’ and should immediately cease any quarterly payments being made related to qualified transportation fringes. Those that previously filed the 990-T for qualified transportation fringes, and paid tax, are entitled to a refund of taxes paid. In order to receive a refund of any tax paid, organizations are required to file amended 2017 and 2018 990-T’s, as applicable. The amended return includes noting at the top of the Form 990-T, “Amended Return – Section 512(a)(7) Repeal,” and attaching a statement indicating the line numbers on the original return that were changed and the reason for the change on the amended return.
You may also be wondering how to get amounts that your organization paid to the IRS as estimates for Form 990-T returns not yet filed. To do so, your organization will need to file a 990-T slowing the amounts paid in as estimated payments with a tax of $.00 and the result is a refund.
The IRS does place time limits on the amount of time to claim a refund. Refunds are limited to three years from the time the original 990-T was filed or two years from when the tax was paid, whichever is later.
Here is a link to the specific IRS instructions: https://www.irs.gov/forms-pubs/how-to-claim-a-refund-or-credit-of-unrelated-business-income-tax-ubit-or-adjust-form-990-t-for-qualified-transportation-fringe-amounts. Please contact our experts at The Bonadio Group today should you have any questions related to your filings.