As part of the 2017 Tax Cuts and Jobs Act, a new tax was imposed on churches and other nonprofits that assigned a value to the concept of providing parking to employees—essentially treating employee parking as a form of “unrelated business taxable income” (UBTI). The Act referred to this provision of parking for employees as a “qualified transportation fringe” (QTF) benefit. This new tax would have resulted in many churches having to file tax returns and pay tax who had not done so previously. This new tax was a surprise to many nonprofits—and immediately sparked a great deal of pushback. The good news is that, because of the backlash, Congress recently repealed this tax.
The initial provision applied to both reimbursements made to employees for parking expenses and to the provision of parking spaces for employees near to the workplace—and even included public parking if used by employees more than 50 percent of the time. Nonprofits were required to determine the cost of supplying the benefit to their employees, which then had to be reported to the IRS Form 990-T. This meant that the cost would then be taxed at the normal corporate rate of 21 percent. Exemptions to this provision did exist. There were numerous questions churches had regarding how this tax would play out in their unique circumstances. Some churches were required to file Form 990-T last year and pay taxes.
The repeal came in December 2019, as part of two spending packages put forth by Congress and signed into law by President Trump. Language placed into these packages applied a retroactive standard—essentially repealing the tax as if it had never been signed into law in the first place.
This means that, if your church filed a return that paid the tax in the time since the initial provision was passed, it is entitled to a refund for the amount paid—which may be achieved via submitting amendments to the returns in which the tax was paid. For more information on the tax, and how to apply for a refund, you can visit our friends at Batts, Morrison, Wales & Lee, nonprofit CPAs who have set up a helpful website on this topic – https://www.nonprofitparkingtax.com/.
Tax exemption is important and must be defended. While we are grateful Congress repealed the tax—and did so retroactively—churches must remain alert about changes to tax and other laws that affect them. Provident Law’s church and nonprofit attorneys are here to answer questions and to aid in establishing and crafting policies governing church activities and benefits. We recognize how essential the missions of religious organizations are for society, and we stand ready to counsel and serve the churches of Arizona. Contact us to learn more.