The Wall Street Journal reported on Dec. 10th that the National Treasury department would ease a new tax burden that has had churches and nonprofits in a bind over offering employee parking. Congress imposed the new rules in last year’s tax law, drastically altering the tax treatment of employer-provided parking and transportation benefits. This prompted many complaints from nonprofits. Senior Treasury officials said the administration couldn’t delay or repeal the tax on it’s own. Instead, the Treasury will offer guidance that will let many churches and nonprofits reduce or eliminate their tax bills while Congress considers changing the provision. Treasury Secretary Steven Mnuchin said in a statement, “The guidance issued today aims to provide flexibility while minimizing the burden on nonprofit groups that provide employee parking.” Under the new guidelines, nonprofits can use reasonable methods to calculate parking costs used in computing the tax this year or use a method directed by the government. Also, nonprofits that have failed to pay estimated taxes on this levy won relief from penalties. The article goes on to outline the impact the tax has had on nonprofits, warning that the new costs could force certain nonprofits to penalize employees or divert money from the people they are working to serve. In addition, the nonprofits asked for specificity on how to calculate the value of the parking benefit and the taxes that result. The new rules give employers flexibility and a sample calculation method they can rely on.
“Under that calculation, the cost of maintaining reserved parking spots for employees is taxed for nonprofits or nondeductible for for-profits. But the rules give employers through March 31 to change the signage and have those new designations count retroactively for 2018. For example, consider a church with a 500-space parking lot where 50 spaces are reserved for employees and the remainder are open for parishioners. The church would have to pay taxes on 10% of its costs. But every reserved-parking sign the church removes between now and March 31 could reduce its tax bill. Once the taxable income goes below $1,000, nonprofits don’t owe tax and don’t have to prepare a special return.”