IRS Legislation Provides UBIT Refund to Tax-Exempt Organizations

The IRS recently provided direction for tax-exempt organizations that want to claim a refund or credit for unrelated business income tax, also referred to as UBIT, paid on qualified transportation fringe benefits. This change could provide significant refunds to affected tax-exempt organizations.

Titled the Taxpayer Certainty and Disaster Tax Relief Act of 2019, the legislation repealed a provision of the 2017 tax reform reconciliation act, commonly referred to as the Tax Cuts and Jobs Act (TCJA), that classified the following as unrelated business income:

  • Transportation benefits
  • Qualified parking facilities
  • On-premises athletic facilities

The repeal is retroactive to December 22, 2017—the date when the TCJA passed.

Next Steps

According to instructions released by the IRS in January 2020, tax-exempt organizations should file an amended Form 990-T for 2017 or 2018 to claim a refund or credit of the UBIT paid in those years.

In general, any amended return should be filed within three years from the time the original Form 990-T was filed, or two years from the time the tax was paid, whichever is later.

Please note, this guidance was released by the IRS specific to the federal income tax filing. Any state or local filings for which these benefits were reported as unrelated would also need to be addressed through a separate amended filing or process specific to that state.

We’re Here to Help

For more information on filing an amended Form 990-T to receive a refund or credit, contact your Moss Adams professional.

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