The nonprofit parking tax was repealed by Congress in December 2019, retroactive to its 2018 start date, so no tax-exempt organization owes it for any year. Organizations that had already paid could recover the money by filing an amended Form 990-T, but by 2026 the standard refund window has closed for every affected tax year. If your organization paid and never filed an amended return, that money is almost certainly gone.
What the Tax Was
The Tax Cuts and Jobs Act of 2017 added Section 512(a)(7) to the Internal Revenue Code. Whenever a tax-exempt organization provided employees with parking, transit passes, or commuter van rides, the cost of those benefits was added to the organization’s unrelated business taxable income.1Internal Revenue Service. Increased Unrelated Business Taxable Income for Nondeductible Fringes That total was taxed at the flat 21% corporate rate.2Joint Committee on Taxation. Overview of Section 512(a)(7) – Unrelated Business Taxable Income Increased by Disallowed Fringe Benefits
That was a departure from the way unrelated business income normally works. UBTI typically applies to revenue from activities unrelated to the organization’s exempt purpose, like a hospital running a public paid garage.3Internal Revenue Service. Unrelated Business Income Tax Section 512(a)(7) instead taxed the cost of a routine employee benefit. A nonprofit spending $50,000 a year on employee parking owed $10,500 in tax, whether or not it had any other unrelated business income. Many organizations that had never filed Form 990-T suddenly had a filing obligation.4Internal Revenue Service. About Form 990-T, Exempt Organization Business Income Tax Return
How the Repeal Works
Section 302 of the Taxpayer Certainty and Disaster Tax Relief Act of 2019 struck Section 512(a)(7) from the tax code.5Congress.gov. H.R. 3301 – Taxpayer Certainty and Disaster Tax Relief Act of 2019 The repeal reached back to amounts paid or incurred in taxable years beginning after December 31, 2017, which was the original effective date of the provision. The law treats Section 512(a)(7) as though it was never enacted. Transportation fringe costs no longer factor into unrelated business taxable income, and they never should have.
Retroactivity was the point. Rather than ending the tax going forward, Congress erased it from the start, which gave every nonprofit that had paid a legal basis to recover the money through an amended return.
Why the Refund Window Has Closed
Federal law gives taxpayers the later of three years from the date the original return was filed or two years from the date the tax was paid to request a refund.6Office of the Law Revision Counsel. 26 USC 6511 – Limitations on Credit or Refund For a calendar-year nonprofit that filed its 2018 Form 990-T by the May 15, 2019 due date, the three-year window expired around May 2022. For tax year 2019, that deadline fell around May 2023. Even organizations with non-calendar fiscal years or filing extensions saw their deadlines expire no later than late 2023.7Internal Revenue Service. Time You Can Claim a Credit or Refund
Narrow exceptions exist. Organizations that signed written agreements with the IRS extending the assessment period, or that were affected by a presidentially declared disaster, may have preserved a longer window. Those situations are uncommon. If you think one applies to your organization, talk to a tax professional before assuming the deadline has passed.
For nonprofits that did file amended returns in time, refunds carried interest from the IRS at the federal short-term rate plus two percentage points, adjusted quarterly. In early 2026 that rate sat between 5% and 6%.8Internal Revenue Service. Quarterly Interest Rates Organizations that acted shortly after the December 2019 repeal collected several years of interest on top of the original payment.
What Still Applies to Nonprofit Parking Benefits
The repeal removed the standalone tax on transportation fringes but did not touch Section 274(a)(4), which makes the cost of providing qualified transportation fringe benefits nondeductible.9Internal Revenue Service. Qualified Parking Fringe Benefit For most nonprofits this is academic, since they have no unrelated business income to deduct expenses against. If your organization earns UBTI from other activities, though, you cannot use parking or transit costs to offset it.
Two exceptions to the nondeductibility rule are worth knowing. If the value of the parking benefit is included in the employee’s wages for tax withholding, the cost remains deductible. Parking facilities available to the general public also fall outside the restriction.9Internal Revenue Service. Qualified Parking Fringe Benefit A nonprofit hospital with a garage used by both employees and patients would need to evaluate how much of the facility serves each group.
Current Monthly Exclusion Limits
The IRS still caps how much of a transportation fringe benefit can be excluded from an employee’s taxable income. For 2026, the monthly exclusion is $340 for qualified parking and $340 for transit passes and commuter van transportation.10Internal Revenue Service. Publication 15-B (2026), Employers Tax Guide to Fringe Benefits Anything above those limits must be treated as taxable wages for the employee. The limits adjust annually for inflation, and they apply per employee per month to the value of the benefit, not just the employer’s cost. A nonprofit providing free parking in a lot where comparable spaces rent for $400 a month would need to include $60 per month as taxable wages for each employee using those spaces.