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Not-for-Profit Parking Tax Repealed: Obtaining a Refund from the IRS

02.11.2020

The IRS has issued guidance for tax-exempt organizations to claim a refund or credit of unrelated business income tax (UBIT) now that the “Parking Tax” has been repealed.

Background

In December 2019, President Trump signed the Taxpayer Certainty and Disaster Tax Relief Act of 2019 into law as part of the Further Consolidated Appropriations Act, 2020 (Public Law 116-94). This legislation retroactively repeals the “Parking Tax.” The repeal applies to amounts paid or incurred after December 31, 2017 (Code Sec. 512(a)(7), as amended by Section 302).

Refund opportunity

The IRS has confirmed that tax-exempt organizations that wish to claim a refund or credit for UBIT overpaid on Form 990-T for 2017 or 2018 should file an amended Form 990-T.

In addition to generally following the Form-990-T instructions for filing an amended return, the IRS issued detailed instructions for tax-exempt organizations. Under IRC Section 6511 refund claims must be made within the later of three years from the date the original Form 990-T was filed or two years from the date the tax was paid.

Additional considerations

While the guidance provided enables tax-exempt organizations to request the refund of taxes paid due to the application of IRC Section 512(a)(7), it does not directly address other implications. For example, cases where the application of IRC Section 512(a)(7) generated an offset to an organization’s net operating loss carryforward.

Organizations should keep in mind any eligible state or local tax refunds for which they may not be entitled.

If an organization paid estimated taxes and wishes to claim a refund without filing Form 990-T for the applicable year, the organization may file Form 4466, "Corporation Application for Quick Refund of Overpayment of Estimated Tax," as long as the estimated tax meets certain thresholds (generally, the overpayment must be at least $500 and at least 10% of the expected tax liability). This form would need to be filed after the end of the tax year for which the estimated tax was paid, but (1) before the organization files its Form 990-T for the tax year and (2) no later than the due date for the return, not including extensions.

For more information on how to file an amended return or seek a refund of tax paid, please contact Jen Vacha, Tax Partner, at jvacha@bswllc.com or 636.754.0230.

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