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IRS Late in Issuing Interim Guidance on Transportation Fringe Benefits

Jude Coard, CPA
12.13.2018 | Client Alert

With the year nearly over, on 12.10.18 the IRS issued interim guidance for the treatment of qualified transportation fringe benefit expenses paid or incurred after 12.31.17. The guidance will help:

  • taxpayers determine the amount of parking expenses that are no longer tax deductible
  • tax-exempt organizations determine how nondeductible parking expenses create or increase unrelated business taxable income (UBTI)

The Service recognizes that taxpayers owning or leasing parking facilities may already have methods in place to determine their nondeductible parking expenses. In these circumstances, taxpayers may use this guidance or any reasonable method until further guidance is issued.

Special Rule May Help Reduce UBTI

The guidance added a special rule to enable many employers to retroactively reduce the amount of their nondeductible parking expenses. These employers have until 3.31.19 to adjust parking arrangements to reduce or eliminate the number of parking places reserved for employees. By doing this, tax exempt organizations — churches, hospitals, schools, among others — may be able to reduce their associated UBTI. There may be opportunities to avoid filing Form 990-T, Exempt Organization Business Income Tax Return. Changes in parking arrangements will apply retroactively to 1.1.18.

The Service also announced estimated tax penalty relief in 2018 for tax-exempts offering these benefits that were not required to file Form 990-T last filing season. Note that some tax-exempts will not exceed the $1,000 threshold below, which an organization does not need to file Form 990-T or pay the unrelated business income tax (UBIT).

Questions? Contact Jude Coard at 516.806.3431 | jcoard@berdonllp.com or reach out to your Berdon tax advisor.

Berdon LLP New York Accountants