The Taxpayer Certainty and Disaster Tax Relief Act of 2019 (the “Relief Act”) has retroactively repealed a provision known as the “parking lot tax.” The now-repealed provision, which had been codified in Internal Revenue Code Section 512(a)(7) (“Code Section 512(a)(7)”), increased an exempt organization’s unrelated business taxable income (“UBTI”) by amounts paid or incurred for certain nondeductible qualified transportation fringe benefits, certain parking facilities, and on-premises athletic facilities. It was called the “parking lot tax” because it meant that if an exempt organization provided free or subsidized parking to its employees, the organization would generally need to increase its UBTI by the nondeductible expenses associated with such parking (to the extent such expenses were not directly connected with an unrelated trade or business regularly carried on by the exempt organization). The now-repealed provision had been enacted for amounts paid or incurred after December 31, 2017 as part of the Tax Cuts and Jobs Act.
Because the Relief Act’s repeal is retroactive, exempt organizations that increased their UBTI as a result of Code Section 512(a)(7) may now claim a refund or credit with respect to taxes paid on such increased amounts. An exempt organization should file an amended Form 990-T to claim such refund or credit. Exempt organizations should keep in mind that the time limits for filing refund claims apply to these refund claims. Typically, these time limits are three years from the time the original Form 990-T was filed or two years from the time the tax was paid, whichever comes later. To the extent that an exempt organization paid state-level income tax with respect to UBTI as a result of Code Section 512(a)(7), the organization should look into obtaining a refund at the state level as well.
For more information regarding the repeal of Code Section 517(a)(7) or claiming a refund, call Julie Rhoades at 313-223-3570.