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Repeal of Unrelated Business Income Tax for Employer Paid Qualified Transportation Fringes

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On December 20, 2019 the President signed into law H.R. 1865, the “Further Consolidated Appropriations Act, 2020” (the Act).

Among many other provisions, Section 302 of the Act repeals the increase in unrelated business taxable income for certain fringe benefit expenses pursuant to Internal Revenue Code Section 512(a). 

This means that the cost of providing qualified transportation fringes such as parking passes, transit passes, and onsite parking no longer must be reported as unrelated business taxable income for tax-exempt organizations. 

The effective date of Section 302 of the Act is retroactive to December 2017 when the provision was first enacted as part of H.R. 1 (the Tax Cuts and Jobs Act). The Internal Revenue Service is expected to release information on how tax-exempt organizations that previously paid tax on qualified transportation fringe expenses can request refunds. 

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