The Internal Revenue Service has issued interim guidance for determining the parking fringe benefit expenses paid or incurred after Dec. 31, 2017. The new rules will help organizations determine the amount of parking expenses that are now subject to unrelated business taxable income (UBTI) for not-for-profit organizations.
The interim guidance helps organizations define and adopt a reasonable method in determining the amount of parking expenses subject to UBIT. Notice 2018-99 offers a reasonable four-step methodology for determining the amount of UBTI resulting from the provision of employee parking .Organizations can rely on the interim guidance until further guidance is issued.
In the guidance there is a special rule, in which, organizations will have until March 31, 2019 to change their parking arrangements, thereby potentially enabling them to reduce or eliminate potential UBTI with respect to parking fringes. It may be possible to avoid having to file a Form 990-T, Exempt Organization Business Income Tax Return, altogether.
The IRS also announced that it will provide estimated tax penalty relief in 2018 to some tax-exempt organizations that offer these benefits and were not required to file a Form 990-T in their prior filing season.
Please contact your GHJ Nonprofit advisor at 310.873.1600 if you have any questions or would like to discuss the rules in further detail.