Year-end spending bill has implications for nonprofits

Just before leaving for their holiday break, Congress passed a few pieces of tax legislation. The year-end spending bill, signed into law on December 20, 2019, included two items of importance to the nonprofit community.

The first item is the retroactive repeal of the parking tax. The December 2017 Tax Cuts and Jobs Act instituted a tax for nonprofits on the fringe benefit of on-premise parking for employees. Many nonprofits have already begun to pay this tax. With its recent bill, Congress repealed this tax retroactively. As a result, nonprofits immediately can cease paying parking tax estimates. The IRS will refund any taxes already paid for 2018 calendar year-ends and fiscal years ending in 2018. We are awaiting guidance from the IRS on how to process refund claims.

The second item of note from Congress’ recent legislation impacts private foundations. Private foundations normally pay a 1-2% tax on net investment income. Determination of the rate is based on whether current-year charitable giving exceeds the average giving for the prior five years. Private foundations giving in excess of the prior five-year average were allowed to use the 1% tax rate, while all others paid a 2% tax. For tax years beginning after December 20, 2019, private foundations will pay a 1.39% tax on net investment income.

If you need assistance preparing an action plan for either of these two legislative updates, please reach out to your CSH advisor or contact us.

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