New parking lot tax may affect some congregations




parking lot

A change to the Internal Revenue Code imposes a new tax on parking facilities owned by nonprofits, and may affect some churches. This new business income tax provision is found in Section 512(a)(7) of the code.

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Last November, Nevin Dulabaum as president of Brethren Benefit Trust (BBT) signed a letter to Congress expressing concern about this, among other changes to tax code. The letter was sent by an interfaith organization representing denominational benefit plans.

To help Church of the Brethren congregations find out whether this tax applies to them, BBT recommends an online resource from Batts Morrison Wales & Lee, a CPA firm dedicated to serving the nonprofit sector.

Go to www.nonprofitcpa.com/irs-issues-guidance-on-application-of-the-nonprofit-parking-tax for the Batts’ resource. Find a helpful Nonprofit Parking Tax Flowchart at www.nonprofitparkingtax.com/wp-content/uploads/2018/12/BMWL-Nonprofit-Parking-Tax-Flowchart.pdf .

The nonprofit parking tax is part of the Tax Cuts and Jobs Act and is effective beginning Jan. 1, 2018. Section 512(a)(7) “says that tax-exempt employers (churches, charities, etc.) must treat as unrelated business taxable income the cost of providing parking to their employees, subject to IRS guidance,” says the Batts’ resource. “What that means in plain language is that Congress created a federal income tax on the cost of employee parking provided by churches, charities, and other nonprofits....

“Parking spaces that are reserved for employees are subject to tax,” the resource explains. “A parking space or group of parking spaces may be reserved by the use of signs, gates, attendants, markers, or other methods that indicate the use of certain spaces is limited to employees.... If an organization reduces or eliminates reserved employee parking spaces by March 31, 2019, the IRS will consider the reduction or elimination of those spaces to be retroactive to Jan. 1, 2018. Reducing or eliminating reserved employee spaces may help an organization reduce or eliminate its tax liability, but that will not be true in every case.”

Churches may not be subject to the tax if they have no parking spaces reserved exclusively for employee use and if a majority of their parking is available to the general public, meaning anyone other than employees.

If the tax applies, it is treated as a tax on unrelated business income and a federal Form 990-T must be filed. A church must pay applicable tax if the sum of the following is more than $1,000: parking expenses subject to the tax and gross revenues from any other unrelated business activities.

For detailed information go to www.nonprofitcpa.com/irs-issues-guidance-on-application-of-the-nonprofit-parking-tax .

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