Good news to close out the year: The "Further Consolidated Appropriations Act, 2020" (H.R. 1865 - the "2020 Act") retroactively repeals the much maligned tax on qualified transportation fringe benefits (the so-called "church tax" or "parking tax"). The 2020 Act, enacted into law on December 20, 2019, also sets the private foundation excise tax on net investment income at a flat 1.39%.

Retroactive Repeal of the Parking Tax (and Return of Employee Only Parking)

Section 512(a)(7),1 enacted as part of the 2017 Tax Cuts and Jobs Act (the "2017 Act"),2 required tax-exempt organizations to include in unrelated business taxable income their costs for providing "qualified transportation fringe benefits" to their employees. The 2020 Act repeals section 512(a)(7) in its entirety and retroactive to the date of its enactment -- in other words, it is as if section 512(a)(7) never existed.

It is expected that the IRS will issue guidance relating to the repeal - rules for amending Forms 990-T that included the parking tax, and for claiming refunds of those taxes.

In the meantime, tax-exempt organizations may cease making any estimated tax payments related to the repealed parking tax.

Also, just in time for the new year, nonprofits can consider promptly re-installing "employee parking only" signage that was removed in response to the 2017 Act.

Simplification of the Private Foundation Net Investment Income Excise Tax Rate

The 2020 Act also sets a flat rate of 1.39% on the section 4940 private foundation excise tax on net investment income (which includes interest, dividends, rents, royalties, and capital gain net income). Formerly, the rate was either 2% or 1%. Private foundations could reduce the applicable excise tax rate from 2% to 1% by meeting certain qualifying distributions requirements in preceding and current taxable years.

The new 1.39% flat rate is effective for tax years beginning after December 20, 2019.


1. All section references are to the Internal Revenue Code of 1986, as amended.

2. Section 512(a)(7) is discussed in detail in our December 19, 2018 client alert -- New Guidance for Nonprofits and the Tax on Parking and Public Transit Benefits (

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.