President Trump recently signed into law a government funding bill that repeals Sec. 512(a)(7). Prior law required that tax-exempt organizations pay unrelated business income tax on transportation fringe benefits on behalf of their employees. The repeal of Sec. 512(a)(7) will be retroactive to the date it came into effect and represents a potential refund opportunity for any tax-exempt organization that paid unrelated business income tax in accordance with Sec. 512(a)(7) for 2017, 2018, 2019 or 2020.
It is anticipated that the IRS will provide a streamlined procedure to expedite refund claims for taxes already paid by these tax-exempt organizations. At this time, we advise that your organization cease paying any further estimates with regard to this tax.
Contact a Friedman advisor to discuss how your tax-exempt organization's tax obligations may be affected in addition to potential refund opportunities.