IRS Issues Guidance for Nonprofits Claiming a Refund or Credit for the Parking Tax

AAFCPAs is excited to share that the IRS has released much anticipated guidance to help nonprofits understand how to claim a refund or a credit of unrelated business income tax (UBIT) or adjust their form 990-T for qualified transportation fringe amounts.

As a reminder, the Further Consolidated Appropriations Act, 2020 retroactively repealed Internal Revenue Code (IRC) Section 512(a)(7), which increased unrelated business taxable income by amounts paid or incurred for qualified transportation fringes. Congress had previously enacted this provision for amounts paid or incurred after December 31, 2017. To read more about the repeal and the other changes it contained click here.

If you wish to claim a refund or credit of the UBIT reported on your Form 990-T for 2017 or 2018 under Section 512(a)(7), you may do so by filing an amended Form 990-T as described in the form’s instructions and do the following as well:

1. Write “Amended Return” at the top of Form 990-T. If the amended return is being filed only to claim a refund, credit, or adjust information due to the repeal of Section 512(a)(7), write “Amended Return – Section 512(a)(7) Repeal.”
2. Complete the Form 990-T as you originally did, but:
   • For a 2017 Form 990-T
     • Reduce the entry on the line on which you originally included the 512(a)(7) amount by that amount. This would have been on line 12 (Other income) if you followed the Recent Developments article originally posted to IRS.gov in filing the 2017 Form 990-T.
     • Complete the rest of the Form 990-T based on that revised entry.
     • Include on the “Other” sub-line of line 45g (Other credits and payments) the amount of tax from line 48 (Tax due) of the original return (if any).
     • If your changes result in your having made an overpayment, you should enter that amount on line 49 (Overpayment) line of the amended return, which you may request as a refund or credit on line 50.
   • For a 2018 Form 990-T
     • Enter “0” (zero) on line 34 (Amounts paid for disallowed fringes).
     • Complete the rest of the Form 990-T based on that revised entry.
     • Include on the “Other” sub-line of line 50g (Other credits, adjustments, and payments) the amount of tax from line 53 (Tax due) of the original return (if any).
     • If your changes result in your having made an overpayment, you should enter that amount on line 54 (Overpayment) line of the amended return, which you may request as a refund or credit on line 55.

3. Attach a statement indicating the line numbers on the original return that were changed and the reason for each change (for example, stating “repeal of Section 512(a)(7)”).

Please keep in mind that the time limits for filing refund claims found in IRC Section 6511 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.

As always, the tax practice of AAFCPAs will continue to keep you informed as things change or provisions become clarified. If you have any questions please contact: Brittany Besler, MBA, CPA, Esq., Tax Consulting Attorney at 774.512.9001, bbesler@aafcpa.com; or your AAFCPAs Partner.