During this past legislative season, congress officially repealed the Internal Revenue Code’s (IRC) Section 512(a)(7). As a result of the legislative repeal, Idaho nonprofits who were required to pay higher taxes after December 31, 2017 due to the increased tax on transportation fringes, may now qualify for tax-credits or financial refunds.
If your organization was affected by the increased rates and wish to claim a refund or credit of the UBIT reported on your Form 990-T for 2017 or 2018 under Section 512(a)(7), you may do so by filing an amended Form 990-T as described in the form’s instructions.
How to Receive Refund
History and Background
Section 512(a)(7) was enacted pursuant to the 2017 U.S. tax legislation known as the “Tax Cuts and Jobs Act.” The provision required tax-exempt employers to increase their unrelated business taxable income (“UBTI”) by amounts paid or incurred for qualified transportation fringe benefits provided to employees, including the provision of parking and public transportation benefits. Despite certain guidance passed at the end of 2018, the provision caused concern amongst tax-exempt organizations because of the prospect of increased tax liability, the lack of clarity for determining the taxable amount of such benefits, and the additional administrative burdens triggered for certain organizations.
Pursuant to the new legislation, Section 512(a)(7) was repealed with retroactive effect to the date of its enactment. As a result, organizations should file an amended Form 990-T to claim a refund for any taxes paid related to such qualified transportation fringe benefits. Organizations are encouraged to consult their own tax advisors as to whether a state tax refund is available as well.
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