On Friday December 20, 2019, President Trump signed H.R. 1865 to make further consolidated appropriations through the fiscal year ending September 30, 2020. Included in this Act, in the final section, was a retroactive repeal of the increase to unrelated business taxable income (“UBTI”) for certain fringe benefit expenses, a result of the Tax Cuts and Job Act signed in December of 2017.
This increase to UBTI was more commonly referred to as the “parking tax” which hit the nonprofit sector rather abruptly since the provision took immediate effect for amounts paid or incurred beginning January 1, 2018. Small, large and multi-national tax-exempt organizations across the nation were affected by the disruptive provision at both the federal and state levels – many grappling with being taxpayers for the first time.
Most organizations were bearing unbudgeted costs and unexpected administrative burden to both understand the law change and file with the appropriate taxing jurisdictions.
While the nonprofit sector is taking a large sigh of relief for the welcome change to the law they are also awaiting guidance on how to file and receive the monies that have been paid in for the last two years for both federal and state purposes. Many practitioners are expecting that FY18, 2018 & FY19 returns will need to be amended to follow the repeal, but no guidance has been provided at this point. Stay tuned!
Kay Vollans, CPA
Senior Manager, Exempt Organization Tax