Two Year-End Tax Law Changes

There were two big changes to tax laws affecting nonprofits sure to spread some cheer. They were part of a year-end appropriations act signed into law on December 20, 2019.

Repeal of the “Parking Tax”

The first change is a repeal of the nonsensical and unpopular tax on qualified transportation fringe benefits (including parking provided to employees). Section 512(a)(7) of the Internal Revenue Code, which imposed the 21 percent unrelated business income tax on qualified transportation fringe benefits, was retroactively stricken from the law as if it never existed. Organizations that paid the tax can amend their Forms 990-T to claim a refund, and guidance should be forthcoming.

Streamlined Private Foundation Net Investment Income Tax

The second change is a simplification of the private foundation excise tax on net investment income to a single 1.39 percent rate, which will generally go into effect for all taxable years starting in 2020 or later. For prior years, Section 4940 of the Internal Revenue Code provides for a dual tax rate regime of either 2 percent or, if the foundation meets certain distribution requirements, 1 percent.