A new bill passed Congress in December 2019 with two major impacts on nonprofit organizations. The bill is expected to be signed by the President soon. The changes are considered positive for nonprofit organizations:
- The bill repeals new code section 512(a)(7), enacted under the Tax Cuts and Jobs Act (TCJA), to remove the increase to unrelated business income for certain fringe benefits related to qualified transportation expenses, including expenses related to parking facilities. The repeal is retroactive to the original date of enactment under the TCJA. Taxpayers who reported these expenses, incurred after December 31, 2017, as income on Form 990-T may file an amended Form 990-T to claim a refund for any taxes paid related to these fringe benefits. This is a long awaited repeal for the tax-exempt community!
- The Act also changes the Internal Revenue Code (IRC) section 4940 private foundation excise tax on net investment income to 1.39%. It eliminates the dual tax rate of 1% or 2% determined based upon the private foundation’s qualifying charitable distributions. The 1.39% rate will be effective for tax years beginning after the date of the Act’s enactment.