Time to Claim Refunds or Credits for Qualified Transportation Fringe Benefits

The IRS has released instructions for nonprofits to request refunds of tax paid on taxable employee fringe benefits. Why is this being done? The taxation of these fringe benefits was repealed in December 2019, when the Further Consolidated Appropriations Act was passed into law. Included in that spending bill was the Taxpayer Certainty and Disaster Tax Relief Act of 2019, which retroactively repealed the Internal Revenue Code that increased unrelated business income tax (UBIT) for transportation fringe benefits.

Originally, under the Tax Cuts and Jobs Act of 2017, amounts paid or incurred after December 31, 2017 for qualified transportation fringe benefits were required to be reported as unrelated taxable income by nonprofits. This included items such as employer-provided parking and public transit passes.

Nonprofits that want to claim a refund or credit of the UBIT they reported in 2017 or 2018 will have to file an amended Form 990-T. The amended return should include a statement explaining the reason for change, such as “Repeal of Section 512(a)(7).” It should be noted that time limits apply to these refund claims. Typically, these time limits are three years from the time the original Form 990-T was filed or two years from the time the tax was paid, whichever is later.

Smith and Howard’s Nonprofit Team has been helping eligible organizations claim their refunds or credit. If you have questions or would like to learn how your nonprofit is affected, please contact Sabre Linahan by filling out the form below.