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The Effects of the New Tax Law on Exempt Organizations


Late last year, Congress enacted the Taxpayer Certainty and Disaster Tax Relief Act, a law whose provisions apply to many tax exempt organizations. To learn more about this law and how it could affect your own business’s tax situation, please contact an experienced Florida tax & IRS attorney who can advise you.

Parking Lot Tax Repealed for Exempt Employers

The Taxpayer Certainty and Disaster Tax Relief Act made a number of changes to the tax code, one of which involves the repeal of parking lot taxes on certain exempt employers. Under the terms of the new statute, tax exempt organizations that pay unrelated business income taxes on certain fringe benefits can now claim a refund. This applies to qualified transportation fringe benefits, such as employer provided parking. To claim a refund for these costs, companies are directed to file an amended Form 990-T before the deadline.

Tax Simplification for Private Foundations

In addition to the amendments regarding parking lot tax exemption, the recently enacted tax law also:

  • Reduced the excise tax on the net investment income of private foundations from two percent to 1.39 percent; and
  • Repealed the one percent special tax rate that applies to private foundations that meet specific distribution requirements.

These new changes are considered effective for all taxable years after 2019.

Government Grants Excluded from Income Calculations of Exempt Utility Cooperatives

Under recent changes to federal tax law, section 501(c)(12) organizations are eligible for a tax exemption, but only if they receive at least 85 percent of their income from their members every year. Furthermore, this income can only be collected and used to meet the organization’s expenses and losses.

Qualifying 501(c)(12) organizations include:

  • Local benevolent life insurance associations;
  • Mutual ditch or irrigation companies; and
  • Mutual or cooperative telephone or electric companies, or similar organizations.

Under the Tax Cuts and Jobs Act (TCJA), which was passed in 2017, government grants are usually considered income and when it comes to telephone and electric cooperative organizations would usually be treated as non-member income. This amendment represented a significant change from prior decades, when government grants were not treated as income, but as contributions to capital.

These rules were clarified under the terms of the new 2019 legislation, which provides that government grants made to 501(c)(12) electric and telephone cooperative organizations for disaster relief purposes or utility facilities and services should not be included when calculating member income. Because these types of government grants are not included in the income test, exempt cooperative organizations can continue to accept funds without impacting their tax exempt status. These changes are retroactive to all taxable years beginning in 2018.

Call Today with Your Tax Law-Related Questions and Concerns

If you live in Daytona Beach, Orlando, Jacksonville, Tampa, or Miami and have questions or concerns about the effects of the recent changes to the tax code on your own exempt organization, please call today to schedule a free case review with experienced tax attorney Ronald Cutler, P.A. We can be reached at 386-490-9949 or via online message.