Nonprofit Alert: Cuomo Signs Bill Exempting Nonprofits from NY Transportation Tax

By Robert Lyons |  Magdalena M. Czerniawski  |  December 13, 2018

On Friday, December 7, 2018, Governor Cuomo signed into New York law the much-anticipated bill exempting nonprofits who provide pre-tax transportation and parking benefits from the New York State level transportation tax. 

Prior to the bill signing, exempt organizations providing pre-tax transportation benefits to its New York employees would have been required to file Form CT-13 in New York State, in addition to filing the federal Form 990-T.  IRC 512(a)(7) imposes tax on qualified transportation fringes and parking provided by tax-exempt organizations to its employees. This bill exempts the transportation fringes from the state level tax only.

IRS Code section 512(a)(7) was introduced in the Tax Cuts and Jobs Act. It is known as the transportation tax and is effective for benefits paid after December 31, 2017. The IRS is using Form 990-T Exempt Organization Business Income Tax Return to report the disallowed amounts and collect the associated tax.

For organizations with fiscal years ending in 2018 that use the 2017 form, these amounts are reported on the 2017 Federal Form 990-T page 1 line 12 as other income. For all others using the redesigned 2018 Form 990-T, the disallowed fringes are reported on page 2 as a one-line item.  They are treated similarly to how proxy tax is reported and paid for lobbying activities.

Similar to New York, New Jersey is taking the position that pre-tax transportation benefits are unrelated business income for state purposes and, as such, not taxable on the state level since New Jersey does not tax unrelated business income. Nonprofits providing these benefits to New Jersey employees would be subject to the federal filing requirement only.

If you need further guidance on any of the provisions of IRC 512(a)(7), please contact Magdalena M. Czerniawski or Robert Lyons, Tax Directors in our Nonprofit, Government and Healthcare Group.

About Robert Lyons

Robert Lyons Linkedin Icon

Robert (Rob) Lyons, CPA, MST, is a Tax Director, Exempt Organizations in the Nonprofit, Government & Healthcare Group at Marks Paneth LLP. Mr. Lyons brings to this role the skills he has developed during more than 30 years of providing tax and consulting services to his clients in the nonprofit, higher education, and public sector industries. His experience includes handling substantial exempt organization tax issues. Mr. Lyons has testified in front of the House and Ways Committee in... READ MORE +

About Magdalena M. Czerniawski

Magdalena M. Czerniawski Linkedin Icon

Magdalena M. Czerniawski, CPA, MBA, is a Partner at Marks Paneth LLP and a member of the firm’s Nonprofit, Government & Healthcare Group. With over 15 years of nonprofit industry experience, she provides tax services to a wide array of nonprofits, including charitable organizations, schools, social welfare organizations, professional associations and private foundations. In addition to providing tax planning and advisory services, Ms. Czerniawski specializes in matters related to ASC 740-10 (FIN 48), the reporting... READ MORE +

SUCCESS IS PERSONAL Click here to learn more about our brand