Special Alert: Congress Repeals Onerous “Parking Tax” And Adjusts Private Foundation Excise Tax Rates on Net Investment Income

Posted on: 1/6/20 by Marvin and Company

The government funding legislation passed by the House on Dec. 17 and by the Senate on Dec. 19 includes repeal of Internal Revenue Code Section 512(a)(7), commonly referred to as the “parking tax”.  The legislation was signed into law by the President on Dec. 20.parking tax image
 
The provision, enacted as part of the 2017 Tax Cuts and Jobs Act, required tax-exempt organizations to include in unrelated business income the amounts they pay or incur on qualified transportation fringe benefits.  The imputed taxable income from the provision resulted in many organizations incurring unrelated business income tax (UBIT) liabilities for the first time.
 
The repeal is retroactive to the original date of enactment.  As a result, organizations are entitled to a refund of taxes paid since the provision’s original effective date of Jan. 1, 2018.  It is possible the IRS may develop a process for claiming the refunds and if so, we will inform you.
 
In addition, the legislation also changes the Section 4940 private foundation excise tax on net investment income to a flat 1.39%, thus eliminating the current two-tier tax rates of either 2% or 1%.  The single rate will be effective for tax years beginning after the legislation’s date of enactment.
 
Stay tuned for more updates and guidance on this matter in 2020.

For additional information, contact your Marvin and Company, P.C. representative.

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