IRS Notice on Tax on Transportation Benefits

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The IRS issued guidance on December 10, 2018, for calculating parking expenses for unrelated business taxable income purposes, a tax imposed as part of the Tax Cuts and Jobs Act, and provided penalty relief to nonprofits. See the IRS News Release.

  • IRS Notice 2018-99 (called “Interim Guidance”) instructs for-profit and nonprofit employers on calculating which parking expenses are taxable. Key takeaways include:
    • Calculating Expenses: The income tax is levied on employer expenses and not on the value of the benefit to employees. Expenses subject to the tax include salary and benefits of parking lot attendants; repaving costs; snow, ice, leaf and trash removal; interest; rent or lease payments, and property taxes. Many of these expenses will require complex analyses to determine whether the employer has sufficient unrelated business taxable income to require tax payments.
    • Parking Only Guidance: The Notice only addresses questions related to parking expenses; no clarity or relief is provided for transit benefits, such as subway cards or bus passes. Non-parking transportation expenses of employers are generally treated by the IRS as unrelated business taxable income under the new tax.
    • Reserved employee parking spaces are automatically treated as unrelated business taxable income. The Notice gives employers a grace period until March 31, 2019 to remove “reserved for” signs and avoid the automatic application of the tax, retroactive to January 1, 2018.
    • Public Parking: General parking spaces used by both the public and employees (without reserved spaces) require a four-step calculation. If the public typically uses more than 50% of the parking spaces, then the expenses for the whole lot are generally exempt.
    • $1,000 Threshold: The statute exempts UBIT of less than $1,000. The Notice makes clear that nonprofits with less than $1,000 in liability do not need to file a Form 990-T.
  • IRS Notice 2018-100 provides for waiver of tax penalties for nonprofits that failed to submit quarterly estimated tax payments for the new tax on transportation benefits. Generally, this means that if you didn’t submit quarterly payments in 2017, then you’re off the hook for this year, but the taxes will still be due when UBIT payments are due.

Publication and Public Comments

Nonprofits affected by the income tax on parking expenses are invited to submit comments to the IRS by February 22.The government recommends submitting individualized comments to regulatory proposals. The comments don’t have to be complex or written in a special format or legal style. Comments “can express simple support or dissent for a regulatory action.” The government website,, advises that “a constructive, information-rich comment that clearly communicates and supports its claims is more likely to have an impact on regulatory decision making.” See Taking the Mystery Out of Filing Comments on Proposed Rules for tried and true tips.


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