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New Tax Laws in Effect for Tax Exempt Organizations by Adam Cohen, CPA


Posted on February 06, 2020 by Adam Cohen

The Taxpayer Certainty and Disaster Tax Relief Act passed in December 2020 includes several law changes that affect nonprofit organizations and the tax returns they file in the current year and those filed in prior years. Because some of the provisions of the act are retroactive, tax-exempt organizations may be eligible to apply the changes to prior year tax returns and qualify for tax refunds.

Retroactive Repeal of Nonprofit Parking Tax

The recently enacted legislation retroactively repeals a provision contained in the 2017 Tax Cuts and Jobs Act (TCJA), which had imposed an “unrelated business income tax” on certain qualified transportation fringe benefits (QTF) that non-profit employers provided to their employees, including complementary parking.

As a result of this reversal, non-profit organizations that filed Form 990-T and paid unrelated business income tax on expenses for qualified transportation fringe benefits for the 2018 tax year may claim refunds by filing an amended Form 990-T.

Simplified Taxation for Private Foundations

Effective for tax years beginning after Dec. 20, 2019, the excise tax private foundations pay on net investment income decreased from 2 percent to 1.39 percent. The new law also simplifies excise taxes for private foundations by creating a single-tax regime and eliminating the availability of a special, 1 percent rate when certain distribution requirements are met.

E-File Requirement

Although not included in the recently enacted law, tax-exempt organizations should remember that effective July 1, 2019, they are required to file with the IRS all information returns and related forms electronically. This includes Form 990, Return of Organization Exempt from Income Tax, and Form 990-PF for private foundations and trusts treated as private foundations.  In 2020, however, nonprofits can continue to file the following forms on paper: Form 990-T, Exempt Organization Business Income Tax Return and Form 4720, Return of Certain Excise Taxed under Chapters 41 and 42 or the Internal Revenue Code. The IRS expects to be ready to accept these forms electronically in 2021 for the 2020 tax year.

About the Author: Adam Cohen, CPA, is an associate director of Tax Services with Berkowitz Pollack Brant Advisors + CPAs, where he works with closely held businesses and non-profit charities, hospitals and family foundations to maintain tax efficiency and comply with federal and state regulations. He can be reached at the CPA firm’s Ft. Lauderdale, Fla., office at (954) 712-7000 or info@bpbcpa.com.

Information contained in this article is subject to change based on further interpretation of tax laws and subsequent guidance issued by the Internal Revenue Service.