Nonprofits, churches may get hit with parking tax

A provision in the tax overhaul enacted by Congress at the end of 2017 means that parking benefits that charities, churches, some hospitals and other nonprofits offer their employees may now be taxable.

The change was included in the massive rewrite of the nation’s tax laws that cut corporate taxes and rates for many individuals and families.

As a result, groups are going to have to figure out whether a tax bill is due for what is called unrelated business taxable income for the parking they provide to staff, regardless if it is for parking lots they own or rent. It may require them to keep track of such costs as paving, striping, insurance and removing snow, and there may be different calculations on whether the public has access to the lot or whether it is used exclusively by staff.

While determining an exact calculation is difficult, an estimate said the tax could cost affected tax-exempt organizations $10,456 apiece based on a 21% tax rate. Administrative and tax-preparation costs could push those costs up by $12,000 or more, according to Independent Sector, a group that represents nonprofits, foundations, companies and other groups.

Before Christmas, the IRS issued guidance for what tax-exempt organizations will need to compute the tax.

That IRS guidance, for example, allows nonprofits to retroactively remove the benefit. It also allows employers to use any “reasonable method” for 2018 to determine to the level of taxable income.

“Treasury is sensitive to the concerns of the tax-exempt community and hopes that guidance can significantly limit the impact on nonprofit groups,” Treasury Secretary Steven Mnuchin said in a statement.