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Repeal of the Nonprofit Tax on Qualified Transportation Fringe Benefits

President Trump signed legislation on Friday, December 20, 2019, which rescinds Internal Revenue Code Section 512(a)(7).

This applies the Unrelated Business Income Tax to “Qualified Transportation Benefits”, the tax on employer provided transit benefits and parking. The House of Representatives passed the legislation on December 17th and the Senate passed the legislation Thursday, December 19th.  The legislation extends various tax provisions, as well as, doing away with this onerous application of Unrelated Business Income Tax to a previously non-taxable fringe benefit.  The provision of parking and transit passes to employees will remain tax free, however, the fair market value over a certain monthly amount ($265 in 2019) remains taxable to employees.

For more information on this topic, please contact a member of our team.

On Friday, December 20, the bill was signed by the President.

With the rescission of paragraph IRC Section 512(a)(7), the tax will be treated as though it was not enacted; to begin with, and taxpayers will be entitled to refunds of taxes paid for 2018 and estimates for 2019 unless they are applied to other unrelated business income taxes owed. It is possible the IRS may develop a process for early refunds.

Updates and guidance on this ruling will follow as they become available.

Authors: Thomas Parisi, Manager | tparisi@withum.com and Richard Ruvelson, Principal | rruvelson@withum.com

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