Parking Tax Update

Updated March 2020

Please note that the below article, which was originally shared on January 14, 2020, has been updated to include IRS guidance for the refund process.

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On December 20, 2019, the “Parking Tax” enacted with the 2017 Tax Cuts and Jobs Act was repealed when President Trump signed the Taxpayer Certainty and Disaster Tax Relief Act of 2019. Specifically, Section 512(a)(7) of the Internal Revenue Code relating to unrelated business taxable income was repealed. This is great news! The highly controversial “tax” on employer-paid parking expenses (qualified transportation fringe benefits) for non-profits has been repealed retroactively to the original date of enactment in 2017. Going forward, non-profits will no longer need to compute or owe this tax. Non-profits who have paid the tax the prior two years are eligible to claim a refund. The IRS has given specific guidance on the process to claim a refund for tax paid for the repealed Section 512(a)(7) disallowed fringe benefits. Refunds will be received by filing an amended Form 990-T by following the form’s instructions and the following:

• Write “Amended Return” at the top of Form 990-T. If the amended return is being filed only to claim a refund, credit, or adjust information due to the repeal of Section 512(a)(7), write “Amended Return – Section 512(a)(7) Repeal.”

• Attach a statement indicating the line numbers on the original return that were changed and the reason for each change (for example, stating “repeal of Section 512(a)(7)”)

• If amending a 2017 Form 990-T:
• Reduce the entry on the line on which you originally included the 512(a)(7) amount by that amount. This would have been on line 12 (Other income) if you followed the Recent Developments article originally posted to IRS.gov in filing the 2017 Form 990-T.
• Complete the rest of the Form 990-T based on that revised entry.
• Include on the “Other” sub-line of line 45g (Other credits and payments) the amount of tax from line 48 (Tax due) of the original return (if any).
• If your changes result in your having made an overpayment, you should enter that amount on line 49 (Overpayment) line of the amended return, which you may request as a refund or credit on line 50.

• If amending a 2018 Form 990-T:
  • Enter “0” (zero) on line 34 (Amounts paid for disallowed fringes).
  • Complete the rest of the Form 990-T based on that revised entry.
  • Include on the “Other” sub-line of line 50g (Other credits, adjustments, and payments) the amount of tax from line 53 (Tax due) of the original return (if any).
  • If your changes result in your having made an overpayment, you should enter that amount on line 54 (Overpayment) line of the amended return, which you may request as a refund or credit on line 55.

To amend, the organization typically has 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. These rules are detailed out in IRC Section 6511.

If you have any questions or would like to discuss this update further, please feel free to let us know.