Legislation Repeals Unrelated Business Income Tax for Transportation Fringe Benefits

Legislation Repeals Unrelated Business Income Tax for Transportation Fringe Benefits

With the passage of the Tax Cuts and Jobs Act in December 2017, an unrelated business income tax (UBIT) on the transportation and fringe benefits that nonprofits offer to their employees was enacted. This impacted many non-profits and required them to file a Form 990-T to report unrelated business taxable income (UBTI) on amounts paid for parking or public transportation benefits. The amount of UBIT was subject to the corporate tax rate of 21%. This additional cost for nonprofit organizations became a concern and there was a large effort to urge legislators to repeal the tax.

On Friday, December 20, 2019, government funding legislation was signed into law for 2020 which included a provision repealing Section 512(a)(7), commonly referred to as the parking tax. The repeal has a retroactive effect to the date of its enactment in December 2017. Organizations can file an amended Form 990-T to claim a refund on the taxes paid related to the transportation fringe benefits.

We will be working with organizations to help them obtain refunds for the repealed taxes paid. Please reach out to us with any other questions.

Article prepared by Justine Bauer.