The recent 2020 appropriations bill signed by President Donald J. Trump includes two key elements that will impact nonprofit organizations.
‘Parking tax’ retroactively repealed
The bill includes a retroactive repeal of Section 512(a)(7), commonly referred to as the “parking tax.”
The provision had required tax-exempt employers like nonprofits to increase their unrelated business taxable income by amounts paid or incurred for qualified transportation fringe benefits provided to employees, including the provision of parking and public transportation benefits.
The retroactive repeal means that the tax never existed and nonprofits likely are eligible for refunds for taxes paid and can restore net operating losses used to offset the tax.
It isn’t known yet if the IRS will establish a stream‐lined procedure for these changes at this point, but any estimated taxes based solely on the qualified parking and transportation fringe benefits will not need to be paid.
Investment tax simplification
The bill includes a simplification of the private foundation tax on their net investment income.
Instead of the current 1% or 2% excise tax, all organizations will be subject to a flat 1.39% excise tax.
Not only will most organizations pay less excise tax, the simplification will make distribution planning much easier, especially in times of need.
The provision applies to all tax years beginning after Dec. 20, 2019 (date of enactment).
How Wipfli can help
The 2020 appropriations bill is $1.4 trillion spending package meant to stop a government shutdown. But the bill includes a significant tax package agreement with more than 30 extensions to expiring tax provisions, repeal of the three Affordable Care Act (ACA) tax provisions, and modifications to certain 2017 tax reform act provisions.
Our team can help untangle the tax implications for you.
Contact us for help to further explore the impact of the appropriations bill— including seeing if you are eligible for a state refund. We can also notify you when the IRS issues procedures to obtain funds. Our tax team can also ensure you are paying the right amount of taxes on your investment income.