2019 Tax Law Changes Potentially Affecting Churches
Monday, December 30, 2019
Tax season is here and we have some important information for your ministry as you prepare tax documents.
Recently, Congress passed the “Taxpayer Certainty and Disaster Tax Relief Act of 2019” (the “Act”). The Act was included as a part of the “Further Consolidated Appropriations Act, 2020,” which was signed into law by President Trump on December 20, 2019.
The Act amends several sections of the Internal Revenue Code, including a significant change to Section 512(a), which defines “unrelated business taxable income.” Specifically, the Act removes Section 512(a)(7). As you may recall, that subsection was added by the Tax Cuts and Jobs Act of 2017 and was the provision that potentially required United Methodist entities to increase their unrelated business taxable income by amounts spent on providing parking to their employees.
Importantly, the change applies retroactively, with the result that it is as if Section 512(a)(7) was never added to the Internal Revenue Code. Thus, in addition to United Methodist entities no longer having to pay any taxes tied to the provision of parking to their employees, the Act also opens the door to obtaining refunds of taxes already paid pursuant to Section 512(a)(7).
We anticipate the Internal Revenue Service will release guidance on how to obtain refunds of any Section 512(a)(7) taxes that have already been paid. We will provide an update if such guidance is made available.
 Section 512(a)(7) potentially created tax liability for nonprofits beyond simply the provision of parking, such as costs relating to transit passes, qualified bicycle commuting, and access to on-premises athletic facilities. For the vast majority of United Methodist entities, however, the provision of parking to employees has been the most likely way by which Section 512(a)(7) would create tax liability.