After almost two years of significant lobbying by the nonprofit community, section 512(a)(7), which created a new category of unrelated business income equal to the amounts paid or incurred to provide qualified transportation benefits to employees, has been repealed. The Further Consolidated Appropriations Act, 2020, signed by the president on December 20, 2019, contains this provision which is effective retroactive to the date the new code section became law. This is a welcome development for the nonprofit organizations subject to this new tax, many of which would not have had unrelated business income otherwise and have incurred significant administrative burden and expenses in trying to comply with this provision.
Countless nonprofits have already filed Form 990-T to report and pay this tax which is no longer applicable. It remains to be seen whether their only recourse will be to file amended returns or if the Department of the Treasury will implement a streamlined process. If your organization paid tax pertaining to this now-obsolete provision, you should be on the lookout for future guidance regarding how to obtain a refund. Please contact Amanda M. Adams, CPA, if you have any questions on what this means for your organization.