January 22, 2020
REPEALED: Unrelated Business Income Tax
Non-profits and other tax-exempt organizations that provide transit or parking benefits can breathe a sigh of relief this new year. The provision that required tax-exempt employers (universities, hospitals, religious institutions, etc.) to declare expenses tied to providing transportation fringe benefits as unrelated business income was repealed as a part of the Further Consolidated Appropriations Act, 2020. Since this repeal is retroactive, tax-exempt employers can file an amended return seeking a refund on the taxes paid since enactment of the Tax Cuts and Jobs Act on December 31, 2017.
The Tax Cuts and Jobs Act of 2017 made qualified transit and parking expenses no longer deductible and subject to Unrelated Business Income Tax (UBIT) for tax exempt organizations (universities, hospitals, religious institutions, etc.).
This meant that tax-exempt organizations were stuck paying a 21% tax on the value of transit and/or parking benefits offered to employees, including pre-tax deductions and subsidies. In response, many organizations reduced or eliminated their transit benefits, making it harder and more expensive for their employees to get to and from work.
Get Reimbursed: The repeal of UBIT on qualified transportation fringe benefits is a retroactive repeal. This means if your organization previously paid taxes on transportation and/or parking benefits (IRS Form 990-T) between December 31, 2017 and December 20, 2019, your organization is eligible to receive a refund.
The IRS has not yet released official guidance on how to file a refunded claim. goDCgo will keep you updated on any new information on this topic.
Reinstate Removed Transit Benefits: Did your organization stop providing transit benefits in response to the UBIT on qualified transportation fringe benefits? If so, 2020 is the year to reinstate your company’s transit benefits and make them better than they were before. The experts at goDCgo can help you identify what types of transit benefits are best for your employees and assist in their implementation.