IRS Addresses Taxation of Qualified Transportation Benefits
By Mark Piszko, CPA, CGMA, Partner
Recently, the Internal Revenue Service (IRS) issued interim guidance (Notice 2018-99) concerning the tax treatment of certain qualified transportation fringe benefits (QTFBs) expenses paid or incurred after December 31, 2017. The new rules apply specifically to parking expenses provided as a fringe benefit to employees and will help determine the amount of those expenses to be treated as unrelated business taxable income (UBTI) for not-for-profit entities.
Determining Potential Amount of UBTI
Under a special rule within the guidance, organizations have until March 31, 2019 to make changes to their employees’ parking benefits that can potentially eliminate the need for the organization to file a Form 990-T, Exempt Organization Business Income Tax Return, or at least reduce or eliminate potential UBTI related to the parking benefits.
The interim guidance provides a detailed four-step process to assist organizations in determining the potential amount of UBTI connected with the provision of parking as a fringe benefit to employees. A number of examples covering different scenarios are also included in the guidance.
NFPs Must Take Action
The inclusion of parking expense and other QTFBs as taxable amounts on Form 990-T caught many not-for-profit organizations off guard and not sure how and when any tax due should be paid. As a result, organizations that failed to make quarterly estimated payments are subject to late filing penalties. In response, the IRS announced that it will provide some estimated tax penalty relief in 2018 (Notice 2018-100) to some not-for-profit organizations that provide these benefits and were not required to previously file a Form 990-T.
If your not-for-profit organization needs assistance with respect to the potential filing of Form 990-T or with any other accounting, auditing, tax or business consulting services, please contact Mark Piszko, CPA, CGMA, Partner-in-Charge, Not-for-Profit Services, at firstname.lastname@example.org or 646.449.6316 or the partner in charge of your account.