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How to claim a refund after repeal of the parking lot tax

Feb 25, 2020

The Taxpayer Certainty and Disaster Tax Relief Act of 2019 retroactively repealed IRC 512(a)(7), which had increased unrelated business taxable income by amounts paid or incurred for qualified transportation fringe benefits. 

Congress had previously enacted this provision for amounts paid or incurred after Dec. 31, 2017 as part of the Taxpayer Cuts and Jobs Act.  The IRS has now given procedures to follow in order to claim an Unrelated Business Income Tax (UBIT) refund of taxes paid.

How can you claim refund on parking lot tax repeal?

To claim a refund or credit of the UBIT reported on your Form 990-T for 2017 or 2018 under Section 512(a)(7), file an amended Form 990-T as described in the form’s instructions.

You also need to:

  1. Write “Amended Return” at the top of Form 990-T.  If the amended return is being filed only to claim a refund, credit or adjust information due to the repeal of Section 512(a)(7), write “Amended Return – Section 512(a)(7) Repeal.”
  2. Complete the Form 990-T as you originally did, but: 
    • For a 2017 Form 990-T
      • Reduce the entry on the line on which you originally included the 512(a)(7) amount by that amount. This would have been on line 12 (Other income) if you followed the recent developments article originally posted to IRS.gov in filing the 2017 Form 990-T.
      • Complete the rest of the Form 990-T based on that revised entry.
      • Include on the “Other” sub-line of line 45g (Other credits and payments) the amount of tax from line 48 (Tax due) of the original return (if any).
      • If your changes result in your having made an overpayment, you should enter that amount on line 49 (Overpayment) line of the amended return, which you may request as a refund or credit on line 50.  
    • For a 2018 Form 990-T
      • Enter “0” (zero) on line 34 (Amounts paid for disallowed fringes).
      • Complete the rest of the Form 990-T based on that revised entry.
      • Include on the “Other” sub-line of line 50g (Other credits, adjustments, and payments) the amount of tax from line 53 (Tax due) of the original return (if any).
      • If your changes result in your having made an overpayment, you should enter that amount on line 54 (Overpayment) line of the amended return, which you may request as a refund or credit on line 55.
  3. Attach a statement indicating the line numbers on the original return that were changed and the reason for each change (for example, stating “repeal of Section 512(a)(7)”).

What else should you consider?

You should also be aware of time limits and individual state laws.

The time limits for filing refund claims that are typically three years from the time the original Form 990T was filed or two years from the time the tax was paid, whichever is later still apply to these refunds.

In addition, some states have a “rolling conformity” of IRS changes.  This means that the retroactive appeal may not yet be available in the state in which the tax was originally paid.

If a significant amount of estimated taxes were already paid for 2019, you may want to consider filing Form 4466, “Corporation Application for Quick Refund of Overpayment of Estimated Tax.”  However, the overpayment of estimated taxes must be both at least $500 and 10% of the expected liability.

How to learn more

Our team can help you work through the most complicated tax issues. To learn more, see our web page.

To learn more, see our previous article on how the bill benefitted nonprofits.

Author(s)

Terri Rexrode, CPA
Director
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