In December 2018, the Internal Revenue Service released Notice 2018-99 that detailed how the IRS planned to implement the part of the Tax Cuts and Jobs Act relating to “qualified parking” benefits to employees. The tax applies to employer-provided parking expenses incurred from January 1, 2018 forward. This tax could also have an effect on not-for-profits. The Notice does provide a safe harbor clause, which may exclude many not-for-profits from the tax. A not-for-profit employer is not subject to the tax if they do not have parking spots specifically reserved for employees and their parking facilities are not primarily (less than 50%) used by employees.

In order to determine if the tax applies, the Organization should follow these steps:

  1. Determine the number of total parking spaces available that they own or lease
  2. Identify spaces that are specifically reserved for employee use
  3. Calculate the number of spaces typically occupied by employees
  4. Identify parking expenses identified in the Notice

The calculation is based on a ratio of (reserved spaces over total spaces) x total parking expenses + (remaining employee spaces over total spaces less reserved spaces times) x total parking expenses. The total qualifying expenses will be reported on a Form 990-T (Unrelated Business Tax Return) and may be subject to a 21% corporate tax.

While, we believe that most not-for-profits will fall within the safe harbor clause and not subject to this tax it is still important for the not-for-profits to go through the exercise above. If you would like to discuss how this tax may impact your organization, please contact your Hawkins Ash CPAs representative.

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Sandy Jensen
I joined Hawkins Ash CPAs in 2001 and am a partner in the firm's La Crosse office. I provide audit services to nonprofit and educational agency audits. I also have extensive experience providing audit services to credit unions. I am chair of the firm’s nonprofit service group and a member of the firm’s Audit and Accounting Committee.

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