Non-Profit Tax Update

Repeal of Parking Tax
With President's Trump's signing of the federal government spending bill on December 20th, the provision that taxed exempt organizations for the allocation of certain disallowed fringe benefits (including parking) has been repealed in its entirety. The bill repeals Section 512(a)(7) of the Tax Cut and Jobs Act (TCJA). Section 512(a)(7) required non-profits that provided qualified transportation fringe benefits such as parking and transit passes to employees to pay Unrelated Business Income Tax (UBIT) on the amount by which a deduction was not allowable under Sec. 274. Repeal of the fringe benefits tax is retroactive for taxes that nonprofits have paid or accrued after December 31, 2017. Watch for an early 2020 e-mail blast for information on how best to obtain a refund if one is owed to your organization.

Modification to the Excise Tax Applicable to Private Foundations
The federal government spending bill also sets a flat rate on the excise tax applicable to the net investment income of private foundations. This change to the current two-tier excise tax structure for private foundations on their investment income under IRC Section 4940 will change Section 4940(a) by amending the current 2% rate to 1.39% and by removing Section 4940(e), which allowed for a reduced tax rate of 1% for private foundations that meet certain distribution requirements.The new flat rate will be effective for tax years beginning after December 20, 2019.