The TCJA has imposed new rules aimed to assist nonprofit organizations in the calculation of nondeductible parking expenses that were once deductible before the passage of the new act. The IRS has issued interim guidance related to the treatment of qualified transportation fringe benefit expenses compensated or incurred after December. 31st, 2017. This interim guidance may also help nonprofit taxpayers find out how these new nondeductible expenses can positively or negatively affect unrelated business taxable income, also known as UBTI.
The guidance provided by the IRS comes in response to objections from several nonprofit organizations to the newly imposed taxes within the Tax Cuts and Jobs Act in relation to parking expenses. The IRS conceded that this interim guidance has been issued quite late in the year. For said reason, the IRS has stated that taxpayers can rely on this interim guidance (until more guidance is given) or use any justifiable method for calculating nondeductible employee parking expenses.
A significant point of the guidance is a particular rule that gives employers the right to retroactively decrease the amount of nondeductible parking expenses stated on Form 990-T. Employers will have until March 31st of 2019 to update their parking records in order to lower or terminate the amount of reserved parking they have set for their employees.
In making these updates, many tax-exempt organizations may be able to reduce their UBTI quite significantly by acting before the end of March, 2019. Mitch Elbarki of Sigma Tax Pro states “Tax professionals should definitely take this as an opportunity to proactively reach out to their tax-exempt clients to help reduce their overall UBTI…I am confident their clients will be quite grateful to say the least.”