AM Exclusive Technicity Newsletter Issue 5 | Page 2

HOW NONPROFIT ORGANIZATIONS CAN GET THEIR
MONEY BACK FOR 2018–2019 PARKING TAXES
BY: EDWARD PROBST, PRESIDENT, VANGUARD INSURANCE AGENCY
Y
our business may not be
a nonprofit, but if you
are involved with any
that are, this is important
information to pass onto
them as they may be eligible for a
tax refund. President Trump signed
the Taxpayer Certainty and Disaster
Tax Relief Act of 2019 into law
on December 20, 2019, as part of
the consolidated appropriations
bill (Public Law No. 116-94). This
law enforces the retroactive
repeal of the ill-conceived tax on
parking fringe benefits provided by
nonprofit employers. The act also
temporarily suspends the charitable
deduction limits on donations to
public charities to support disaster
relief, and it simplifies the excise
tax on a private foundation’s net
investment income so that only one
flat rate now applies.
The Tax Cuts and Jobs Act (TCJA)
had originally added Section 274
to deny employers a deduction
for expenses paid or incurred to
provide employee parking after
December 31, 2017. To create parity
between taxable and tax-exempt
organizations, the TCJA created
the new Section 512(a)(7), which
required tax-exempt organizations
to increase their UBTI (Unrelated
Business Income Tax) by the amount
of employee parking expenses that
would be nondeductible if they
were subject to the same deduction
disallowance rules as taxable
entities. In effect, tax exempt
entities were required to pay tax of
up to 21%, and this was referred to
as the Church Parking Tax. This 21%
tax on expenditures, not income,
was an unwelcome and costly shock
to the nonprofit sector.
Many organizations had to file IRS
Form 990-T for the first time in
order to calculate and pay the UBIT
amounts due in 2018 and 2019.
Based on the December 20th
amendments, the Church Parking
Tax has been repealed and
eliminated for all amounts paid or
incurred after December 31, 2017.
Tax-exempt organizations should
take immediate steps to ensure
that their UBTI records reflect this
change. The repeal of Code Section
512(a)(7) is retroactive, which
means nonprofit organizations may
now wish to amend their returns
filed for 2018 and 2019 to claim
refunds of the taxes paid under
Section 512(a)(7) for those years.
EDWARD PROBST
Edward Probst is one of the founders of Vanguard Insurance Agency, which provides employee
benefit solutions to small to mid-sized companies in the New York Metropolitan area (including A M
Exclusive!). He is also actively involved in helping the local nonprofit community leading “Vanguard
Cares” initiatives. To learn more, visit vgdny.com/vanguard-gives-back.