The spending bill passed and signed on December 20, 2019 included some great news for nonprofits: the tax on nonprofit employee transportation benefits, written into federal law in 2017, was repealed. This is a major victory for the nonprofit sector and a testament to what we can accomplish when the nonprofit community works together and reaches out to allies.

This illogical and harmful tax forced nonprofits to pay a 21% tax on employee benefits: yes, a tax on expenses. If a nonprofit paid for transit passes or employee parking – even on property they owned – they had to pay 21% of that amount in taxes. CalNonprofits members told us that some were forced to discontinue transportation benefits, and others paid tens of thousands of dollars in unnecessary taxes, and in additional accounting and audit costs.

The new law repeals the tax retroactively. Nonprofits that paid the benefits-related unrelated business income tax (UBIT) for the tax year 2018 will be entitled to a refund of the taxes paid, but not the administrative and accounting expenses incurred in calculating it. While filing amended tax returns is the normal way to claim refunds, the IRS may be convinced to develop an alternative or streamlined approach in the near future. Make sure you subscribe to receive email updates on this and other issues impacting nonprofits.

The parking tax repeal passed in Congress with bipartisan support. And we want to say a special thank you to California members of Congress! California nonprofits and houses of worship joined with colleagues across the country to make Congress see the light. We can all be proud and happy that we succeeded.

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