Tax-Exempt Organizations UBIT Refund Guidance

NSTPInternal Revenue Service (IRS)

Tax-Exempt Organizations UBIT Refund Guidance

Tax-Exempt Organizations UBIT Refund Guidance

On its website, the IRS has posted instructions for how exempt organizations can claim a refund or credit of the unrelated business income tax they paid with respect to qualified transportation fringe benefits. This fringe benefits provision was retroactively repealed by legislation enacted in December 2019.

Background. Before it was repealed, Code Sec. 512(a)(7) required the unrelated business taxation income (UBTI) of tax-exempt organizations, i.e., the base used in computing the UBIT, to be increased by expenses related to qualified transportation fringe benefits (the so-called "church parking tax"). The Code section applied to amounts paid or incurred after December 31, 2017.

How to claim a refund or credit resulting from the retroactive repeal. To claim a refund or credit of the UBIT reported on Form 990-T for 2017 or 2018 under Code Sec. 512(a)(7), file an amended Form 990-T as described in the form's instructions and do the following as well:

  1. Write "Amended Return" at the top of Form 990-T. If the amended return is being filed only to claim a refund, credit, or adjust information due to the repeal of Code Sec. 512(a)(7), write "Amended Return – Section 512(a)(7) Repeal."
  2. Complete the Form 990-T as you originally did, but:

For a 2017 Form 990-T:

  • Reduce the entry on the line on which you originally included the Code Sec. 512(a)(7) amount by that amount. This would have been on line 12 (Other income) if you followed the Recent Developments article originally posted to IRS.gov in filing the 2017 Form 990-T.
  • Complete the rest of the Form 990-T based on that revised entry.
  • Include on the "Other" sub-line of line 45g (Other credits and payments) the amount of tax from line 48 (Tax due) of the original return (if any).
  • If your changes result in your having made an overpayment, you should enter that amount on line 49 (Overpayment) of the amended return, which you may request as a refund or credit on line 50.

For a 2018 Form 990-T:

  • Enter "0" (zero) on line 34 (Amounts paid for disallowed fringes).
  • Complete the rest of the Form 990-T based on that revised entry.
  • Include on the "Other" sub-line of line 50g (Other credits, adjustments, and payments) the amount of tax from line 53 (Tax due) of the original return (if any).
  • If your changes result in your having made an overpayment, you should enter that amount on line 54 (Overpayment) line of the amended return, which you may request as a refund or credit on line 55.
  1. Attach a statement indicating the line numbers on the original return that were changed and the reason for each change (for example, stating "repeal of Section 512(a)(7)").

IRS also notes that the time limits for filing refund claims found in Code Sec. 6511 apply to these refund claims. Typically, these time limits are 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.