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:
- Determine the number of total parking spaces available that they own or lease
- Identify spaces that are specifically reserved for employee use
- Calculate the number of spaces typically occupied by employees
- 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.