In addition, it addressed the treatment of net operating losses both pre-enactment and post-enactment of the Act.
The notice points out two exceptions for tax-exempt organizations that would otherwise pay UBIT on the transportation benefits provided to employees. The first one is if the organization includes the full value of the transportation benefits as taxable wages to the employ- ee. The second one is when the organization provides the benefits to employees on the same basis as the general public. In both cases, the exempt organization wouldn’t be liable for any tax under 512(a)(7). If the organization does not meet either of these two excep- tions, it is subject to tax. Further, the notice addresses that the transportation benefits can be provided tax-free to employees up to the maximum amount allowed. That amount for 2018 is $260 per month. Any benefits provided above that amount must be included in the taxable wages of the employee, and therefore, will not be taxable to the organization. DETERMINING THE PARKING EXPENSE AMOUNT The notice specifically offers guidance to determine the nondeductible amount of parking expenses as well as the amount treated as increasing UBTI. The method of determining the nondeductible amount depends on whether the taxpayer pays a third party to provide parking for its employees or owns or leases a parking facility where its employees park. • Taxpayer Pays a Third Party for Employee Parking Spots. If a taxpayer pays a third party for a space so that its employees can park at that facility, the disal- lowed portion is generally the total amount paid to the third party. However, if the amount the taxpayer pays exceeds the monthly allowance ($260 for 2018) per employee, the excess amount must be treated by the organization as wages to the employee. In determining the value of parking facilities, multiple parking facilities within the same geographic area can be aggregated in determining the number of spaces available. However, if the facilities are located in more than one geographic area they must be de- termined on a separate basis. • Taxpayer Owns or Leases All or a Portion of a Parking Facility. Until more guidance is available, the value of
More recently, on December 10, 2018, the IRS issued Notice 2018-99 and Notice 2019-100 regarding Code section 512(a)(7), which relates to the treatment of the nonde- ductible portion of parking and transportation fringe expenses as unrelated business taxable income (“UBTI”). Notice 2018-99 provides interim guidance for taxpayers to determine the amount of parking expenses related to qualified transportation fringes (“QTFs”) that are not deductible by the organization. Those expenses under IRC 512(a)(7) are the increase in the amount of UBTI and, therefore, subject to tax. In contrast to other provisions in the Act, the transportation fringe benefit tax relates to benefits paid after December 31, 2017. Fiscal year filers will need to differentiate tax treatment of these benefits between post- and pre-January 1, 2018 benefits. • Qualified Transportation Fringes include transportation in a commuter highway vehicle between the employee’s residence and place of employment, any transit passes, and qualified parking. • Qualified Parking includes parking provided to an employee on or near the business premises of the employer, or on or near a location from which the employee commutes to work. (Does not include residential parking.) • Employee includes any individual who is currently employed by the employer. It also includes common law employees and other statutory employees such as officers of the corporation. Common law and statutory employees look to the state definition. For example, where there are leased employees that under state law meet the definition of a statutory employee, the organization would be responsible for the treatment of the related fringe benefits provided to them. • Parking Facility is defined as any indoor and outdoor garages and other structures, as well as parking lots and other areas, where employees may park on or near the business premises of the employer or on or near a location from which the employee commutes to work. BACKGROUND In order to fully understand Notice 2018-99, the below definitions are important.
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