Under the 2017 Tax Act, Congress made any non-profit offering certain tax-free fringe benefits to its employees, such as to free or subsidized parking, as well as on-premises athletic facilities, report the expenses associated with those benefits as taxable income under the unrelated business taxable income (“UBTI”) rules. 26 U.S.C. § 512(a)(7). The rule was enacted to make non-profit employers face the same the same tax burden as for-profit employers faced when the for-profit provided its employees the above fringe benefits tax-free. https://www.smgglaw.com/blog/new-tax-on-non-profit-organizations-cost-of-transportation-related-fringe-benefits (Has a helpful summary of the 2017 tax law change).
Under the “Taxpayer Certainty and Disaster Tax Relief Act of 2019,” Act. § 302, P.L. 116-94 (passed Dec. 20, 2019), Congress retroactively repealed 26 U.S.C. § 512(a)(7). The retroactive repeal means any non-profit that paid tax under the 2017 Tax Law rules (on the Form 990-T for 2018 or 2019) is owed a refund. Generally, non-profits have three years after filing the Form 990-T or two years after paying the tax, whichever is later, to seek a refund on an amended Form 990-T.
Planning for the Future – Change in Employee Benefits for 2020
Non-profits which had made decision to eliminate the above tax-free fringe benefits, because of the burdens of UBTI in 2018 and 2019, may want to consider making the benefits tax-free to employees in 2020 and in the future.
Strassburger McKenna Gutnick & Gefsky can help you with non-profit tax planning. Please contact John Kelly, email@example.com or Dave Pollack, firstname.lastname@example.org at (412) 281-5423 for help with tax matters.
This post is provided for informational purposes only. Nothing in this post creates an attorney client relationship. Many of the rules discussed above have complicated exceptions. Please consult with your tax advisor before you implement any tax planning idea.