The Internal Revenue Service posted informal guidance on its website to assist nonprofits claiming refunds for previously paid unrelated business income tax associated with the “parking tax” on nonprofits, which was repealed retroactively. (See McGuireWoods’ alert addressing Congress’ repeal of this provision of the 2017 Tax Act.) The IRS provided this guidance in response to a Jan. 8, 2020, request by U.S. Reps. Richard Neal (D-Mass.) and John Lewis (D-Ga.).
Nonprofits should be aware that the general rules state that the time limit for filing refund claims of unrelated business income tax (UBIT) previously paid on Form 990-T is three years from the time the original Form 990-T was filed or two years from the time the tax was paid, whichever is later.
To claim a refund or credit of the UBIT reported on an IRS Form 990-T for 2017 or 2018, the nonprofit should file an amended Form 990-T. If filing an amended return only to claim a refund, credit or adjust information due to the repeal of the “parking tax,” the nonprofit should write “Amended Return – Section 512(a)(7) Repeal” on the top of the Form 990-T.
Following the general instructions for submitting an amended Form 990-T, nonprofits should include a statement that provides the line numbers on the original return that were changed and state that the amended return is being filed because of the “repeal of Section 512(a)(7)” and include a description of any other items that are being amended on the return.
The IRS also provided specific instructions for completing the amended Form 990-T for 2017 and 2018 tax returns. For 2017 tax returns, on the line on which they originally included the additional expenses that were treated as unrelated trade or business taxable income, nonprofits should reduce the entry by that amount. Typically, this would have been on line 12 (Other income). For 2018 returns, the IRS stated that nonprofits should enter a zero on line 34 (Amounts paid for disallowed fringes) of the amended Form 990-T.
Amended returns should be submitted to the Ogden, Utah, Service Center by certified mail or private delivery service.