Churches and other nonprofits that provide parking for their employees are getting a gift from the Treasury Department this holiday season: new guidance that softens the burden of a TCJA provision requiring them to file federal and state income tax returns on parking benefits.
A recent release from the Treasury Department shows tax-exempt organizations how they can compute unrelated business taxable income resulting from parking provided to their employees. It also helps employers determine the number of parking expenses that are no longer tax deductible and offers penalty relief for some tax-exempt organizations affected by the new rules.
Last month, a coalition of some 32 faith-based organizations joined with the Ethics & Religious Liberty Commission of the Southern Baptist Convention in calling on Congress to repeal the parking tax provision.
Churches have long been required to file IRS Form 990-T as long as they generate unrelated business income. The new law, however, would require many more churches and tax-exempt organizations to file the form because the federal income tax is now applied to parking benefits.
The coalition argued in their letter sent to members of Congress, that churches and nonprofits stood to lose about $1.7 billion in 10 years as a result of the new tax.
The new guidance from Treasury allows tax-exempt and taxable employers to use any reasonable method for 2018 to determine the increase in unrelated business income as well as a safe harbor method that should minimize the burden on affected employers.
Many tax-exempt organizations do not exceed the $1,000 threshold for paying unrelated business income. Those organizations will not be required to report unrelated business income or pay the applicable tax.
The ball is now in Congress’ court. Will it repeal the tax altogether? We’ll have to wait and see. Stay tuned to our blog and news sections for updates.