Tax Extender Bill Contains Possible Repeal of 512(a)(7) and Change in Private Foundation Tax Rate

After negotiating over the weekend, leaders in the House and Senate came to an agreement on a number of expired and expiring tax credits as well as some important fixes to the 2017 Tax Cuts and Jobs Act. Earlier this afternoon, the House passed the $1.4 trillion spending package that included these items.

In the package are two important updates for the nonprofit sector:

• The law would repeal Section 512(a)(7) of Tax Cuts and Jobs Act that imposed a tax on nonprofit organizations that provided qualified transportation fringe benefits, otherwise known as the “parking tax”. The current language appears to make the repeal retroactive back to the date of the original 2017 Tax Act.
• The law would also change the investment income tax rate for private foundations from the current 1% or 2% structure to a fixed 1.39% rate. This would be effective for future years beginning after the bill is passed.

The House will next pass a second measure to fund the rest of the federal government, and the Senate is expected to clear the pair of bills for President Trump’s signature later this week.

Contact your Marcum tax advisor with any questions pertaining to this tax flash.