An End to the Upside Down World of Taxing Expenses?

Recent developments in Washington are providing hope that exempt organizations might be getting a surprise holiday present.  Lawmakers and administration officials announced that they reached an agreement on a bill extending many expired and expiring tax provisions.  In addition to extenders, the legislation has a provision to repeal Code §512(a)(7), which taxes qualified transportation fringe benefits.

Since January 1, 2018, exempt organizations have been subject to a tax on the amount of parking expense that is attributable to employee parking--an income tax on an expense.  There was also tax on the expense incurred in bus passes provided to employees.  Needless to say, this tax has been very burdensome and costly to exempt organizations.  Numerous pieces of legislation have been proposed to eliminate this tax, but nothing has come close to passing.

According to reports, the Taxpayer Certainty and Disaster Tax Relief Act of 2019, has passed the House on Tuesday afternoon and is in place to pass the Senate and be signed into law on Friday by the President.  The draft legislation indicates that Code §512(a)(7) will be struck as of the date of the Tax Cuts and Jobs Act.  The result would seem to be that any tax paid as the result of this code section would be refundable.  Certainly, no information is available on how this would be accomplished.

If you have any questions on the Parking Tax and its tentative demise, please contact any of our exempt organization experts.  We will post further updates as they become available.