Finally! Clarity for Nonprofits around Tax Provisions
Provisions for Tax-Exempt Organizations
On December 20, 2019, President Trump signed the Taxpayer Certainty and Disaster Tax Relief Act of 2019. This legislation allowed for many provisions that will impact organizations into 2020, including our nonprofit community.
The act gave the tax exempt community a welcome gift, by including a repeal of the provision taxing qualified transportation fringe benefits and a simplification of the private foundation excise tax on investment income.
Repeal of Taxation of Qualified Transportation Fringe Benefits
The Act repeals the provision the 2017 Tax Cuts and Jobs Act that taxed as unrelated business income transportation fringe benefits such as parking and other transit benefits provided by nonprofit organizations. Many of our clients and other nonprofits were required to file a Form 990-T including these amounts on their 2018 and 2019 tax returns.
The Act repeals this provision retroactively to January 1, 2018 – essentially it is as though the provision in the 2017 Tax Act were never enacted. Nonprofit organizations are no longer required to pay the tax, but more importantly there is the opportunity to seek a refund of taxes already paid. As of the signing of new law, many have advocated for a streamlined process for making refund claims. Absent other guidance, it appears organizations would be required to file an amended Form 990-T to obtain a refund of previously paid amounts.
Private Foundation Excise Tax
The Act also further simplifies the private foundation excise tax on investment income by replacing the current two-tiered system (2% and 1%) with a flat rate of 1.39%. This change means private foundations are no longer required to monitor investments and grant making in an attempt to manage its tax rate. For years, the private foundation sector has long advocated for a flat excise tax rate. The 1.39% tax rate is effective for tax years beginning after the date of enactment of the Act (January 1, 2020 for calendar year foundations).
For additional information or questions, please follow this link: https://www.claconnect.com/contact-us
Curtis Klotz is a CPA serving as director of nonprofit innovation at CLA. His writing is inspired by his work in CLA’s nonprofit consulting and business operations practice and more than 30 years of industry experience. Before joining CLA, Curtis was vice president of finance and CFO at Propel Nonprofits, where he was a frequent online contributor to Nonprofit Quarterly and other blogs. He was named Minneapolis/St. Paul Business Journal’s Nonprofit CFO of the Year in 2017, and is past chairperson of the Montana Nonprofit Association. Curtis graduated summa cum laude from St. Olaf College with majors in women’s studies and religion.
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