The Tax Cut and Jobs Act of 2017 (The Act) made some changes as regards the way tax exempt organizations have to account for parking and qualified transportation fringe benefit expenses paid or incurred after Dec. 31, 2017. In a December 10 press release, the IRS announced that it has issued an interim guidance which should clarify some of the confusion regarding the treatment of such expenses.
As we reported earlier this year, the new rules in The Act regarding transportation benefits may have created an unintended consequence for nonprofits of an increase in unrelated business taxable income (UBTI).
According to the press release, the new guidance will “assist taxpayers in determining the amount of parking expenses that are no longer tax deductible. They also help tax-exempt organizations determine how these nondeductible parking expenses create or increase unrelated business taxable income (UBTI).”
According to the IRS Notice, Number 2018-99, employers will have until March 31, 2019, to change their parking arrangements thereby potentially enabling them to reduce or eliminate potential UBTI with respect to parking fringes. And it may be possible to avoid having to file a Form 990-T, Exempt Organization Business Income Tax Return, altogether.
The IRS went on to say that the agency recognizes that this guidance falls late in the year and taxpayers that own or lease parking facilities may have already adopted reasonable methods in 2018 to determine the amount of their nondeductible parking expenses. Taxpayers may rely on the guidance or, until further guidance is issued, use any reasonable method for determining nondeductible parking expenses related to employer-provided parking.
In the same press release, the IRS also announced that it will provide estimated tax penalty relief in 2018 to tax-exempt organizations that offer these benefits and were not required to file a Form 990-T last filing season.
How MBAF Can Help
While the newly issued guidance has cleared up many of the issues regarding UBTI as related to parking and transportation benefits for tax-exempt organizations, the rules are still complex, and require expertise to apply them properly to your organizations situation, to ensure that you can minimize, or eliminate UBTI under the new rules.
At MBAF we have been carefully analyzing and assessing the impact of The Act on nonprofits and tax exempt organizations. Our experts are familiar with all of the opportunities created by this new guidance, as well as the potential pitfalls. As always it is our goal to help you continue to your great works, while minimizing any tax obligations.
Understanding all of the implications, and possible unintended consequences of the Tax Cut and Jobs Act of 2017, can be quite complex. If you would like to benefit from our expertise in these areas or if you have further questions on this Advisory, do not hesitate to contact our Tax and Accounting specialists, or call us at 1-800-239-1474.