Refund of Parking Tax For Nonprofits

Nonprofits can now receive a refund of Parking Taxes paid in 2017 and 2018. The 2017 Tax Cuts and Jobs Act imposed the so-called “Parking  Tax” on nonprofits. The Parking Tax required nonprofits to pay a new form of unrelated business income tax (“UBIT”) on amounts they incurred for providing transportation and parking benefits to their employees. (As we reported in 2018, this is a tax on a nonprofit’s expense, NOT income.) As a result, many nonprofits dutifully reported and paid the tax with their annual IRS filing for 2017 and 2018. Last month, Congress retroactively repealed the Parking Tax in The Taxpayer Certainty and Disaster Tax Relief Act of 2019.

How to get a refund of the Parking Tax

The IRS responded quickly, releasing guidance on how to claim a refund or credit for Parking Taxes paid in prior years. In a rare act of taxpayer empathy, the IRS made the process simple. All a nonprofit whose only UBIT was related to the Parking Tax must do is file an amended IRS Form 990-T (the tax return for UBIT). It is important to note, amending Form 990-T will be more complex for nonprofits that had additional sources of UBIT.

If the only amendment to the return is due to the Parking Tax repeal, the taxpayer must write “Amended Return – Section 512(a)(7) Repeal” at the top of their amended Form 990-T. In addition, the nonprofit must include an attachment explaining the changes line by line. In this case, “repeal of Section 512(a)(7)” is all the reason the nonprofit must provide.

Nonprofits that paid the Parking Tax must request the refund (i.e., file an amended 990-T) within three years from when it filed the original return or two years from when it paid the tax, whichever occurred later.

Read on for information regarding where to report the reduction in order to get a refund.

For 2017

On a 2017 Form 990-T, the expense subject to the Parking Tax should have been reported on line 12 (Other Income). Therefore, on the amended return, reduce this line by the amount of transportation expenses included on the original return. After that, complete the rest of the return based on the revised entry and enter any overpayment on line 49.

For 2018

On a 2018 Form 990-T, the expense should have been reported on line 34 (Amounts paid for disallowed fringes). Therefore, on the amended return, this line should now read “0” (zero). After that, complete the rest of the return based on the revised entry and enter any overpayment on line 54.

Additional Information

For both years, the taxpayer should attach a statement indicating which lines on the return have been changed and the reason for each change. In this case, “repeal of Section 512(a)(7)” would be an appropriate reason.

Nonprofits that paid the Parking Tax must request the refund (i.e., file an amended 990-T) within three years from when it filed the original return or two years from when it paid the tax, whichever occurred later.