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Parking Fringe Benefits and Unrelated Business Income

The IRS has provided guidance and examples for calculating the nondeductible portion of parking expenses. In addition, the IRS has provided guidance to tax-exempt organizations to help such organizations determine how unrelated business taxable income (UBTI) will be increased by the nondeductible amount of such fringe benefit expenses paid or incurred.

The IRS also has also provided transitional estimated tax penalty relief to tax-exempt organizations that offer qualified transportation fringe benefit expenses and were not required to file a Form 990-T, Exempt Organization Business Income Tax Return, last filing season.

Background

The Tax Cuts and Jobs Act added Code Sec. 274(a)(4) to preclude for profit employers from deducting qualified transportation fringe benefits expenses paid or incurred on behalf of employees beginning January 1, 2018.  Qualified transportation fringe benefits include; van pools, transit passes, bicycle commuting, and qualified parking.

TCJA also added Code Sec. 512(a)(7), which requires exempt organizations to increase unrelated business taxable income (UBTI) by any amount for which a deduction is not allowable under Code Sec. 274 and which is paid or incurred from January 1, 2018 onward for any qualified transportation fringes and any parking facility used in connection with qualified parking. read more

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