The Internal Revenue Service moved to soften the hit from a controversial provision in last year’s tax overhaul that imposes a tax on some coveted benefits for employees at nonprofits.
The law sets a 21% tax rate for nonprofits on so-called fringe benefits — such as free parking and fare for mass transit — they provide to employees. Previously, nonprofits didn’t have to pay tax on the perks. Religious groups have pressured top Republican leaders, including House Ways and Means Chairman Kevin Brady, to repeal the tax this year.
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Nonprofits, such as churches and colleges, would be given some leeway when calculating the cost of parking benefits and won’t face penalties this year if they were confused about how much they owed, according to guidance released by the IRS on Monday.
The IRS gave the new interpretation, including the transitional relief provision, in IRS Notice 2018-100.
Brady, who had previously defended the provision, called for its elimination in a revised year-end tax package he released Monday afternoon.
“We want those nonprofit organizations to focus on their core missions,” Brady told reporters. “Repealing this allows them the certainty to do that.”