NEWS

Qualified Transportation Fringe Benefits Tax Repealed

January 3, 2020

On December 20, 2019, the federal government spending package titled, the Further Consolidated Appropriations Act, 2020 (the Act) was signed into law.  The Act included a provision repealing Section 512 (a)(7), which imposed an unrelated business income tax on qualified transportation fringe benefits for nonprofit organizations.

The repeal is retroactive to the date of its enactment, January 1, 2018. The IRS issued the following guidance on January 21, 2020 with regards to the Act:

  • To claim a refund or credit of the UBIT reported on your Organization’s Form 990-T for 2017 or 2018 under Section 512(a)(7), you may do so by filing an amended Form 990-T.
  • Write “Amended Return – Section 512(a)(7) Repeal.”
  • For 2017 Form 990-T:
    • Complete the return as you originally did for all other items other than the disallowed fringe benefits entry.
    • Reduce the entry on the line on which you originally included the 512(a)(7) amount by that amount. Per IRS guidance, this would have been on line 12 (Other income).
    • Complete the rest of the Form 990-T after consideration of 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 the organization 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.
  • For 2018 Form 990-T
    • Complete the return as you originally did for all other items other than the disallowed fringe benefits entry.
    • Enter “0” (zero) on line 34 (Amounts paid for disallowed fringes).
    • Complete the rest of the Form 990-T after consideration of 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 the organization 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.
  • For each amended filing, 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)”).
  • The due dates for filing refund claims is typically 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.

Please contact us for more information.