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Parking Lot Tax Repealed

Simms_1.14.20

By H. Robert Showers, Esq.

A very controversial provision called the “Parking Lot Tax” which was included with the Tax Cuts and Jobs Act of 2017 (TCJA) was officially repealed December 20, 2019, after President Trump signed into law two spending packages—worth a combined $1.4 trillion—that Congress adopted earlier. The original provision was an unrelated business income tax (UBIT) of 21% on qualified transportation fringe benefits, including employer-provided parking, provided by nonprofits and churches. Widespread criticism from across the nonprofit and church sectors erupted almost immediately after the TCJA was passed in December of 2017. The backlash from the so-called “parking lot tax” was criticized throughout the summer of 2018, then resurfaced again at the end of 2018 and throughout 2019 when the IRS finally issued its guidance on the provision’s implementation.

We wrote an extensive article on the 4-step process and gave numerous examples of how it worked in our newsletter we published in January 2019 (Can the IRS Tax Your Organization’s parking Lot). We stated at the time, that “the likely consequence of the IRS’s notice interpreting the tax is that many churches, nonprofit and small business organizations may be removing or significantly reducing the amount of reserved employee parking to try to limit their tax liability. The easy-out under this tax is for organizations who remove all employee reserved parking (by March 31, 2019) and have parking lots used primarily by the general public. This of course, will be much easier to accomplish in a rural area, than an urban one.” Many organizations did take the easy out but now it is no longer needed.

The repeal operates retroactively back to January 2018.  Nonprofit and Church Organizations that have filed returns paying the tax may amend those returns to obtain refunds and we are hopeful that the IRS may give refunds without the need to file amended returns for refunds for the Nonprofit parking Lot Tax paid.

In its earlier analysis of the tax (written)_Evangelical Council for Financial Accountability (ECFA) had estimated that “the cost of compliance for churches and nonprofits could run into the tens of millions of dollars annually.” Congressional planners estimated that the tax would pull $1.7 billion over the next 10 years from the overall charitable sector.

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Disclaimer: This memorandum is provided for general information purposes only and is not a substitute for legal advice particular to your situation. No recipients of this memo should act or refrain from acting solely on the basis of this memorandum without seeking professional legal counsel. Simms Showers LLP expressly disclaims all liability relating to actions taken or not taken based solely on the content of this memorandum. Please contact Robert Showers at hrs@simmsshowerslaw.com or Will Thetford at wrt@simmsshowerslaw.com for legal advice that will meet your specific needs.

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Simms Showers LLP is conveniently located two blocks from the Loudoun County Courthouse. Our criminal defense firm offers a free phone consultation for criminal or personal injury cases. Se habla español. Call Simms Showers LLP for quality legal counsel today at 703-997-7821 or contact us online.

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