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Free Parking? March 31st Deadline to Adjust Employee Parking Arrangements and Avoid Taxation is Fast Approaching!

March 25, 2019

The Tax Cuts and Jobs Act (TCJA) includes a number of provisions that directly affect tax-exempt organizations. Notable among these is the change subjecting the cost of certain qualified transportation fringe (QTF) benefits to unrelated business income tax.

Although this tax is in effect as of 1/1/2018, there are options for employers who wish to avoid this tax completely.


Prior to the passage of the TCJA, tax-exempt organizations were able to provide their employees with transportation fringe benefits in a tax efficient manner. There were no tax consequences to the tax-exempt organization and the employees did not have to recognize taxable income equal to the value of the benefit (monthly maximum of $265 per employee).

The TCJA amends the unrelated business income provisions by adding Section 512(a)(7) to the Internal Revenue Code (IRC), which imposes tax on exempt entities with respect to QTF benefits.

Specifically, the provision treats the funds used to pay for these fringe benefits as unrelated business taxable income, provided the amounts are not deductible under IRC Section 274 (Disallowance of Deductions for Certain Expenses for Entertainment, Amusement, Recreation, or Travel). In effect, this subjects the cost of these fringe benefits to tax at the corporate tax rate.

IRS Guidance

In December 2018, the Internal Revenue Service issued Notice 2018-99 to provide interim guidance for determining the nondeductible portion of parking expenses for QTF benefits.

Of key importance, this notice indicates that employers have until March 31, 2019, to change parking arrangements and reduce or eliminate the number of parking spots reserved for employees. The change can retroactively apply, dating back to January 1, 2018, which would eliminate the tax liability for the organization.

Mazars Insight

Organizations should immediately analyze any employer-provided parking arrangements and determine if it would be more beneficial to eliminate all, or a portion of, these, prior to March 31, 2019, to avoid adverse tax consequences.

Please contact your Mazars USA LLP professional for additional information

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