After the Tax Cuts and Jobs Act of 2017 (P.L. 115-97) added Section 512(a)(7) to the Internal Revenue Code (IRC), the tax imposed by that section quickly became known as the "parking tax." This provision required every tax-exempt organization to increase its unrelated business taxable income by the amount of the expenses paid or incurred by the organization after Dec. 31, 2017, for providing qualified transportation fringe benefits to its employees. These expenses included those attributable to providing mass transit benefits or a parking facility for use by such employees.
On Dec. 20, 2019, the Taxpayer Certainty and Disaster Relief Act of 2019 (P.L. 116-94) repealed IRC Section 512(a)(7) retroactively, as if it had never been enacted. For those tax-exempt organizations that already paid the parking tax between Jan. 1, 2018, and the present, the IRS confirmed that such organizations may file an amended Form 990-T to claim a refund or credit of the tax.
In addition to following the ordinary instructions provided for Form 990-T, an organization that is filing an amended return solely to claim the refund or credit due to the repeal of Section 512(a)(7) should write "Amended Return – Section 512(a)(7) Repeal" at the top of the Form 990-T. The organization should revise the return to not include any amount attributable to Section 512(a)(7) and attach a statement indicating the lines for which the numbers changed from the original return and stating "repeal of Section 512(a)(7)" as the reason for the changes.
The claims for credit or refund must be filed within three years from the time the original return was filed or two years from the time the tax was paid, whichever is later.
The repeal of this "parking lot tax" will be a welcome relief for tax-exempt organizations, in particular those that had no other unrelated trade or business activity or were not otherwise required to file the Form 990-T.
Originally published as a Holland & Knight Alert January 23, 2020.