Employee Transportation Fringe Benefits Refund Process

As we discussed in our previous not-for-profit tax articles, the Tax Cuts and Jobs Act of 2017 created an unrelated business income tax on certain qualified transportation fringe benefits provided by employers. These benefits included employer-provided parking, parking passes, transit passes, bus or rail passes, van pools, and similar amounts excluded as taxable income to the employee, which were reimbursements to cover an employee’s normal commuting expenses.

On December 20, 2019 the Further Consolidated Appropriations Act 2020, which was signed by the President, included a provision for the retroactive repeal of the unrelated business income tax on certain employee transportation fringe benefits. This repeal was met with great enthusiasm by the not-for-profit community. However, the mechanism for seeking reimbursement of past payments for these items was unknown – until now.  

The latest published IRS notification announced a required process to enable taxpayers a vehicle to claim a refund, or credit of unrelated business taxable income, paid for taxable years beginning in 2017 and 2018, by filing an amended Form 990-T. The IRS release emphasizes that adherence to the detailed instructions is extremely important, as the 2017 and 2018 years Form 990-T varied in content. As such, the amendment process for years ending in 2017 and 2018 will be somewhat different. In general, the form’s instructions include:

• Notating at the top of Form 990-T the words “Amended Return” or “Amended Return – Section 512(a)(7)” if the return was filed solely due to this code section;
• Completing the appropriate year’s 990-T with the recommended revisions as detailed in the IRS release; and
• Attaching a statement indicating the line numbers on the original return that were changed, and the reason for each change (i.e., writing “Repeal of Section 512(a)(7)”).

As with other amended returns, organizations must submit an amended return within three years of filing the original form or risk losing their refund.

HOW WE CAN HELP

Citrin Cooperman's Not-for-Profit Practice professionals are available to assist your organization not only with further explaining the impact of the tax acts and repealment, but also with preparation and filing of amended returns for potential refunds.