21 Feb New Parking Tax for Nonprofits
As part of the Tax Cuts and Jobs Act that went into effect in January 2018, there is a new “parking tax” that applies to nonprofit organizations, including churches. The new regulation creates unrelated business income tax on qualified transportation fringe benefits, including employer-provided parking.
Accordingly, if a nonprofit organization pays fees to third party vendors for employee parking or pays for mass transit passes for employees, and these benefits are excluded from employees’ taxable income, then the nonprofit organization will report unrelated business income in the amount of the parking/transit fees paid.
Or, if a nonprofit organization owns its own parking lot, and any of the spaces are marked as being reserved for employees only, then an analysis must be done to determine whether the organization’s expenses associated with maintaining the parking lot will be subject to unrelated business income tax. (The IRS will allow organizations to remove any signs that reserve parking for employees as late as March 31, 2019 and will consider the removal retroactive to January 1, 2018.)
Unrelated business income is reportable on IRS Form 990-T; taxes are assessed if the unrelated business income is $1,000 or more in a given year. The filing deadline for the 990-T is by the 15th day of the 5th month following the organization’s year-end (May 15 for a December year-end).
If your organization (1) pays fees to third party vendors for employee parking, (2) pays for mass transit passes for employees, or (3) has its own parking lot with any of the spaces marked as being reserved for employees only, please call PSK at (817) 664-3000 for guidance regarding this new regulation.
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