Not-for-Profit alert: IRS indicates procedure for TCJA refunds

The 2017 Tax Cuts and Jobs Act (“TCJA”) imposed an unrelated business income tax of 21% on the expenses nonprofits incur for providing Transportation Fringe Benefits under section 512 (a)(7) such as transit passes and employee parking.

On December 20, 2019, The Taxpayer Certainty and Disaster Tax Relief Act of 2019 (the “Act”), which repeals the tax on nonprofit transportation benefits, was signed into law.

The repeal represents a fundamental change that is retroactive to the date the TCJA was effective and undoes many of the critical changes.

Today’s News for Nonprofits:

There has been confusion relating to the implementation of the repeal as it relates to tax amount versus interest and penalties, IRS notices being received after the repeal has been signed into law, and what to report back to the IRS in order to receive a refund.

In direct consultation with the IRS, Mazars USA has learned that the procedure for refunds, communicated to IRS agents this morning, will be to file an amended return showing zero tax liability.

This decision took place January 16, 2020 and will be a positive step towards a clear resolution on implementing the repeal.

Mazars Insight

While there are still many specifics of this process that the IRS still needs to provide guidance on, such as the removal of potential penalties, organizations should focus on filing these amended returns so as to receive these refunds as soon as possible. It should also be noted that the speed at which the IRS will process these changes, approve refunds and discontinue enforcing the original TCJA regulations is unknown. Therefore, organizations may want to avoid relying on these funds for imminent needs.

We at Mazars will remain at the forefront of this process and will be reaching out to provide assistance and guidance to our clients.

Please contact your Mazars USA LLP professional for additional information.

Published on: January 16, 2020

The information provided here is for general guidance only, and does not constitute the provision of tax advice, accounting services, investment advice, legal advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal or other competent advisers.