January 17, 2020
Tax on Transit Benefits for Exempt Organizations Officially Repealed
On December 20, 2019, as expected, the President signed into law H.R.1865 – Further Consolidated Appropriations Act, 2020. Buried on the last page of the text was a repeal of Section 512(a)(7); a part of the Tax Cuts and Jobs Act of 2017 which required exempt organizations to pay tax on qualified transportation fringe benefits (QTFBs). Employer-provided parking, transit passes and other transportation items provided by the employer were taxed as income under this Section. We previously wrote about the expected repeal of 512(a)(7) here.
This comes as a welcome relief to many nonprofit employers, who were subject to the new tax and the additional reporting requirements. Because the law is effective retroactively, taxes previously paid under 512(a)(7) are eligible for a refund, and quarterly payments may cease. At this time, the refund process is uncertain, as it is not known whether full amended returns will be required, or if the IRS will implement a more streamlined approach.
If you have any questions about your organization’s tax liability under this provision, please feel free to contact us.