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2019 Tax Act Effects on Tax-Exempt Organizations; Required Section 501(c)(4) Notices

By Harry J. Friedman on January 24, 2020
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The Tax Cuts and Jobs Act included a provision increasing taxes on tax-exempt organizations. New Internal Revenue Code Section 512(a)(7) required that tax-exempt organizations include in computing unrelated business taxable income any amount incurred by the tax-exempt organization (i) for any qualified transportation fringe benefit for an employee (generally, costs of mass transit passes and parking near the employer place of business), (ii) any parking facility used by employees, or (iii) any on-premises athletic facility used by employees, in each case to the extent that such amounts would not have been deductible by the tax-exempt organization if it were a for-profit organization.

The impact of Code Section 512(a)(7) was to impose tax on the amount of these fringe benefits provided to employees on organizations that might otherwise be exempt from income tax. Religious organizations that previously were not required to file federal income tax returns were required under this Code provision to file income tax returns to report and pay tax. Many tax-exempt organizations lobbied extensively to have this tax repealed. Organizations argued that this was unfair to charitable organizations and diverted money away from charitable activities.

This lobbying by tax-exempt organizations was successful.

Read the full GT Alert.

Photo of Harry J. Friedman Harry J. Friedman

Harry J. Friedman has a wide-ranging experience in the area of general business tax planning, including the formation of joint ventures, limited partnerships and limited liability companies, consolidated tax returns, and mergers and acquisitions of both private and public corporations. In addition, Harry…

Harry J. Friedman has a wide-ranging experience in the area of general business tax planning, including the formation of joint ventures, limited partnerships and limited liability companies, consolidated tax returns, and mergers and acquisitions of both private and public corporations. In addition, Harry provides advice and counseling to tax exempt organizations including hospitals, private schools, and scientific research organizations on maintaining tax-exempt status, unrelated trade or business income issues, and joint ventures as well as corporate governance issues.

Read more about Harry J. FriedmanEmail
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  • Posted in:
    Nonprofit and Exempt Organizations
  • Blog:
    Legacy Advisors
  • Organization:
    Greenberg Traurig, LLP

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