The Repeal of the Taxation of Qualified Transportation Fringe Benefits

Enacting Internal Revenue Code Section 512(a)(7) through the Tax Cuts and Jobs Act 2017, Congress moved into the uncharted territory of taxing nonprofit organizations through the taxation of expenses associated with providing qualified transportation fringe benefits to employees.  Seeing this as an equalizer to removing the deduction for the same benefits from for-profit employers, law makers determined having all employers pay the tax on the fringe benefits would be preferential to taxing the employees on the benefits. 

The resulting outcry was enormous especially when both the IRS and the Joint Committee on Taxation made it clear that the "taxable" expenses would include expenses associated with an employer provided parking lot even when the parking represented little or no real value to the employee.  Creating a tremendous record keeping burden as well as a tax burden, the outcry from the nonprofit community was swift and loud. 

As early as the summer of 2018, there were bills prepared and presented in both houses of Congress repealing the offensive provision.  In the fall of 2018, President Trump announced he would sign legislation repealing the provision, but with the election looming, no action could be achieved from Congress.  As 2019 progressed, it became clear sufficient support to remove the offensive provision existed, if it could just be included in legislation that Congress could agree to pass.  The mission was accomplished on December 20th when President Trump signed the appropriations bill including the provision to remove Code Section 512(a)(7).  The tax provision is not only ended, it is as if it never was.  Nonprofit organizations who complied with the tax reporting should look for IRS guidance on how to obtain refunds of previously paid taxes associated with qualified transportation fringe benefits.