December 17, 2019
Repeal of Tax on Transit Benefits for Exempt Organizations Included in Tax Extenders Bill
House and Senate leaders reached a tentative deal to consolidate several separate spending and tax extenders bills in an effort that would avert a government shutdown on December 20. The deal includes a provision that would repeal the tax on qualified transportation fringe benefits (QTFBs) to exempt organization employers.
The tax on QTFBs was created as part of the Tax Cuts and Jobs Act of 2017 and was aimed at creating parity between for-profit employers (to whom QTFBs were made non-deductible as part of the Act) and nonprofit employers. The tax impacts exempt organizations that offer benefits such as employer-paid parking, mass transit passes, and no-additional-cost parking, which was excluded from employees’ taxable wages. This forced many exempt organizations who had never engaged in any otherwise-taxable activity to file Form 990-T to calculate and remit the new tax, as well as required these organizations to make quarterly estimated tax payments.
Although the spending bill contains many provisions which remain controversial, including repealing elements of the Affordable Care Act, the House passed the combined bill on Tuesday, December 17, and the Senate is expected to pass the bill. The President is then expected to sign the bill into law in order to avoid a partial government shutdown at midnight on Friday, December 20.
The repeal of the tax would be retroactive, apparently allowing organizations that had already paid the tax for amounts paid or accrued after December 31, 2017, to amend previously-filed returns to claim a refund of the tax paid.
Further updates on the progress of this bill will be shared. If you have any questions about your organization’s tax liability under this provision, please feel free to contact us.