The “Further Consolidated Appropriations Act, 2020” government funding bill was signed by President Donald Trump on Dec. 20, 2019 and includes a provision to repeal Sec. 512(a)(7), which relates to the tax imposed on tax-exempt organizations for providing transportation and parking to employees. The tax was first implemented through the Tax Cuts and Jobs Act back in December 2017.

The nonprofit sector was impacted greatly by this new code section, which treated certain employee fringe benefit expenses as unrelated business income and subject to a 21-percent tax. The nonprofit sector raised their concerns to Capitol Hill these past two years and expressed the negative impact the employee parking tax and the additional burden of complying with the related filing requirements.

What does this mean for nonprofits?

The provision makes the repeal retroactive, and tax-exempt organizations will have the opportunity to receive refunds for the tax paid and accrued after Dec. 31, 2017. It is not clear yet how the refunds will be processed, so further guidance will be needed from the Internal Revenue Services.

To get more information on this change and its effects on nonprofits, please contact GHJ’s Nonprofit Tax Leader Lizbeth Nevarez.