IRS New Tax Law Effects on Tax-Exempt; The Internal Revenue Service outlines the new tax law effect on tax exempt organizations though the United States. The recent changes in the tax law might affect tax-exempt organizations, therefore the IRS want them to know about it. The Taxpayer Certainty and Disaster Tax Relief Act passed on 20th December, 2019. Several provisions are included in this Tax Relief Act that may be applied on the current and previous tax years of tax-exempt organizations. Recently, the IRS also passed a new law for tax exempt organizations to e-file their tax forms. The new tax law changes affecting tax exempt organizations include the following.
1. Repeal of “Parking Lot Tax” On Exempt Employers
The increase in unrelated business taxable income by amounts paid or earned for various fringe benefits for which a deduction is not allowed are retroactively repealed by this legislation. Most notable qualified transportation fringes include employer-provided parking. This provision had previously enacted by Congress as part of the Tax Cuts and Jobs Act, effective for amounts paid or incurred after 31st December, 2017.
Tax-exempt organizations may claim a refund from the IRS is they have paid unrelated business income tax on expenses for qualified transportation fringe benefits. Employee parking is included in such transportation fringe benefits for claiming a refund. For doing so, tax exempt organizations are required to file an amended Form 990-T within the specified time for claiming refunds. If you need any further assistance, visit this link.
2. Tax Simplification for Private Foundations:
According to the new legislation, the 2% excise tax on net investment income of private foundations is reduced to 1.39%. Simultaneously, the 1% special rate is repeated by the legislation which is applicable in the case when the private foundation meets specific distribution requirements. It must be noted that these changes are valid for taxable years beginning after 20th December, 2019.
3. Exclusion Of Certain Government Grants By Exempt Utility Co-Ops:
As a general rule, 85% or more of the income of a section 501(c)(12) organization must be received from members to continue exemption. According to the legislative changes in the Tax Cuts and Jobs Act, government grants are typically considered as income and would otherwise be treated as non-member income for telephone as well as electric cooperatives. According to the previous law, government grants were usually not treated as income, instead these were considered as contributions to capital.
According to the latest 2019 legislation enacted as part of the Tax Cuts and Jobs Act, government grants made to tax-exempt 501(c)(12) telephone or electric cooperatives for purposes of disaster relief, or for utility services or facilities, are not considered when applying the 85%-member income test. Because the income test does not include these government grants, therefore these grants may be accepted by exempt telephone or electric co-ops without the grant impacting their tax-exemption. For those taxable years that are beginning after 2017, this legislation is retroactive.
If you need any further assistance on accounting & taxation services for tax exempt organization, you can ask for initial free inquiry from our qualified accountants at Black Ink. Not to forget, IRS Revises Form 1023 for Applying For Tax-Exempt Status.