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Legislative update: Congress passes repeal of “parking tax” provision

Congress passes repeal of “parking tax” provision

The U.S. Senate today passed government funding legislation for the 2020 fiscal year. The legislation includes a measure to repeal what is commonly referred to as the “parking tax”—that is, section 512(a)(7) that requires tax-exempt organizations to include in unrelated business taxable income the amounts they pay or incur on qualified transportation fringe benefits.

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Section 512(a)(7) was enacted as part of the 2017 tax law (Pub. L. No. 115-97, the law that is often referred to as the “Tax Cuts and Jobs Act” (TCJA)). The legislation states that the measure “shall take effect as if included in the amendments made by section 13703 of Pub. L. No. 115-97” so that the repeal of section 512(a)(7) would apply retroactively to the date of its enactment of the TCJA (December 22, 2017).

The legislation also includes:

  • A provision to flatten the rate of tax on the net investment income of private foundations to 1.39%, replacing the current two-tier tax at rates of either 2% or 1%
  • A provision to allow mutual or cooperative telephone or electric companies to not take into account as income certain government grants when applying the requirement under section 501(c)(12) that 85% or more of income consists of amounts collected from members

The U.S. House of Representatives passed the legislation on December 17, 2019. Therefore with Senate passage, the legislation will now be sent to the White House for action by the president.


KPMG observation

If the legislation is enacted, there could be refund opportunities for tax-exempt organizations that paid unrelated business income tax on qualified transportation fringe expenses under section 512(a)(7). 

 

For more information, contact a tax professional with KPMG’s Washington National Tax practice:

Ruth Madrigal | +1 202 533 8817 | ruthmadrigal@kpmg.com

Preston Quesenberry | +1 202 533 3985 | pquesenberry@kpmg.com

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