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No More Church Parking Tax: Elimination of the Tax on Nonprofit Transportation Fringe Benefits

Nonprofit transportation fringe benefit

Good news for nonprofits — a change to the tax code has erased the transportation fringe benefits tax. Organizations that have already paid it could be eligible for a refund.

To understand what is happening now requires looking back at the 2017 Tax Cuts and Jobs Act (TJCA). The TJCA required treating the amount paid or incurred to provide parking or other fringe benefits to nonprofit employees as unrelated business taxable income (UBTI).

This provision created confusion and controversy. Even with the guidance provided, nonprofits were still confused as to how to treat such benefits. They also worried this would hurt their ability to get and keep good employees. Nonprofits began to complain and lobby for relief. In political circles, this provision became known as the “church parking tax.”

Thankfully, on December 20, 2019, the Further Consolidated Appropriations Act (Pub. L. No. 116-94) went into effect. This act repealed that provision of TJCA, effective the same day as TJCA itself. It is as if the tax never existed.

However, some nonprofits have already reported this income on their returns and paid taxes on it. Those organizations should investigate filing an amended return and asking for a refund. If you have any questions about how this may affect your nonprofit organization, please contact a member of LaPorte’s Nonprofit Industry Group.