The Further Consolidated Appropriations Act, 2020 was signed into law on December 20, 2019. This law retroactively removed the transportation fringe benefits tax for nonprofit organizations. Specifically, it struck out the wording that required transportation fringe benefit expenses (parking and transit passes) to be included in the unrelated business income definition.
Going forward, this means the only time a nonprofit needs to be concerned about calculating the amount of nondeductible transportation fringe benefit expenses is when the nonprofit already has another unrelated business. The transportation fringe benefit expenses are nondeductible for that unrelated business. In other words, they cannot be considered expenses on the 990-T. “Taxable expenses” will no longer be included on the 990-T.
This bill is retroactive. This means all the taxable transportation fringe benefits reported on the fiscal year 2017 or 2018 Form 990-T can be refunded to the nonprofit. Currently, the refund may be requested by filing an amended 990-T return. Even if no tax was paid, due to using a net operating loss carryforward, it may be beneficial to amend the 990-T return to get the net operating loss carryforward back to its original, larger amount. For organizations that paid interest and penalties for late payment on a notice, rather than on the return, it is not clear how those amounts will be refunded via an amended 990-T return.
We will keep you updated if the IRS provides any additional guidance on obtaining refunds for transportation fringe benefits or reclaiming net operating loss carryforwards that were used against transportation fringe benefits. If you would like Yeo & Yeo to prepare your amended 990-T return, please contact your Yeo & Yeo professional. Preparation of an amended 990-T would be a separate and distinct engagement with a separate engagement letter and fee.