Tax on Certain Fringe Benefits Repealed and Single Excise Tax Rate Set

Certain tax-exempt organizations stand to benefit from tax-law changes contained in legislation signed into law on December 20, 2019.

The legislation repeals a provision of the Tax Cuts and Jobs Act of 2017 that classified qualified transportation benefits, qualified parking facilities, and on-premises athletic facilities as unrelated business income for tax-exempt organizations.

The repeal would be retroactive to the passage of the 2017 tax-reform bill and allow organizations that paid unrelated business income tax on these fringe benefits to seek a refund.

For private foundations, the legislation establishes an across-the-board 1.39% excise tax on net investment income as opposed to the two-tier excise tax previously imposed where foundations were taxed at either 1% or 2%. The 1% rate applied to those private foundations whose qualifying distributions equaled or exceeded a certain threshold.

The new tax rate goes into effect for taxable years beginning after the date this legislation was enacted.

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Contact your Moss Adams tax-exempt advisor to learn more about how this legislation could affect your organization.