The Nonprofit Parking Tax Has Been Repealed Retroactively
As part of a large spending package to avoid a government shutdown, Congress passed legislation repealing the infamous “Nonprofit Parking Tax” – an income tax on the cost of parking provided by nonprofit organizations to their employees performing exempt charitable, religious, and educational activities. The repeal of the Nonprofit Parking Tax is retroactive – the legislation literally states that the effective date of repeal is as if the tax was never in the original law. The bill was signed by President Trump on December 20, 2019.
“It is about time that this ill-advised and absurd tax on America’s nonprofits found its way to the dust bin of history,” said Mike Batts, managing partner of Batts Morrison Wales & Lee. “We said this was a bad idea from the beginning, and it didn’t get better with age. What is saddest about it is the immeasurable amount of money, time, energy, and focus the nonprofit sector had to expend in an attempt to comprehend and apply this bad law,” added Batts. “I hope future Congresses will have more respect for the nonprofit community and all that it does to meet the needs of people throughout the world.”
Given that the repeal is retroactive, organizations that have filed returns paying the tax may amend those returns to obtain refunds. We expect that the IRS will issue guidance on the refund process. We are hopeful that the IRS might automatically generate refunds for organizations that filed income tax returns solely to pay the Nonprofit Parking Tax, without the need to file amended returns. We will monitor the IRS’s published guidance in this area and we will keep our clients informed.
The information provided below is for historical reference only, and is not currently applicable.
What is the Nonprofit Parking Tax?
As part of the big tax reform law passed by Congress and signed into law by President Trump in late 2017 (the Tax Cuts and Jobs Act), provisions were added that relate to certain fringe benefits provided by tax-exempt employers to their employees. Those provisions became effective January 1, 2018.
One provision, new Section 512(a)(7) of the Internal Revenue Code, says that tax-exempt employers (churches, charities, etc.) must treat as unrelated business taxable income the cost of providing parking to their employees, subject to IRS guidance.
What that means in plain language is that Congress created a federal income tax on the cost of employee parking provided by churches, charities, and other nonprofits.
Please note that the links to other resources such as the original BMWL Special Alert and the BMWL Flowchart Tool have been deactivated in light of the repeal.