Along with many folks in the tax-exempt community, we too were starting to lose hope that it would never happen. However, we were pleasantly surprised when legislative gifts from the government arrived early Friday, December 20, 2019 as President Trump signed into law two appropriation bills following passage in both the House of Representatives and the Senate. Both H.R. 1158, Consolidated Appropriation Act and H.R. 1865, Further Consolidated Appropriations Act, also averted a government shutdown that would have commenced December 21, 2019.
The passing of H.R. 1865 brought fantastic news to many tax-exempt organizations through the retroactive repeal of Internal Revenue Code (“IRC”) §512(a)(7). This widely unpopular Code Section was implemented by the Tax Cuts and Jobs Act of 2017, and had previously treated the value of qualified transportation fringe (“QTF”) benefits (both pre-tax commuter reimbursement and certain parking benefits) to employees as unrelated business taxable income (“UBIT”).
With the repeal of IRC §512(a)(7), QTF benefits will no longer be treated as UBIT on the Form 990-T. The repeal is effective retroactive to December 22, 2017, and therefore any organization that incurred UBTI as a result of section 512(a)(7) should be eligible to seek a refund (and presumably any associated penalties and interest, if applicable).
Please note that June 30, 2018 and September 30, 2018 fiscal year ends and December 31, 2018 calendar year end filers will need to amend their Forms 990-T to claim this refund. However, the Internal Revenue Service (“IRS”) may establish a separate consolidated refund process for claims related to the parking tax repeal. Withum will keep you updated with any additional guidance from the IRS.
The bill, in its entirety, is a $1.4 trillion Federal spending package, which also includes the repeal of three ACA related taxes as outlined below:
Please do not hesitate to contact a member of Withum’s Healthcare Services Group with questions.