Treasury Dep't issues guidance softening parking tax burden on churches, nonprofits
Churches and other nonprofits that provide parking for their employees welcomed new guidance from the Treasury Department Monday that softens the burden of a provision in the new Tax Cuts and Jobs Act requiring them to file federal and state income tax returns on parking benefits.
A release from the Treasury Department said the issued guidance shows tax-exempt organizations how they can compute unrelated business taxable income resulting from parking provided to their employees. It also helps employers determine the amount of parking expenses that are no longer tax deductible and offers penalty relief for some tax-exempt organizations affected by the new rules.
“Treasury is sensitive to the concerns of the tax exempt community, and hopes this guidance can significantly limit the impact on non-profit groups,” Secretary Steven T. Mnuchin said. “Treasury is offering tax exempt organizations a roadmap for navigating their responsibilities. The guidance issued today aims to provide flexibility while minimizing the burden on non-profit groups that provide employee parking.”
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Last month, a coalition of some 32 faith-based organizations joined with the Ethics & Religious Liberty Commission of the Southern Baptist Convention in calling on Congress to repeal the parking tax provision.
"Churches ought not be seen by the government as untapped sources of tax revenue. While the effect this section of the tax code may very well have been unintended, it must be remedied. As the American founders clearly understood, the power to tax is the power to destroy. The proper separation of the state from the church is at the heart of our American project. This section of the tax code, however, blurs those lines in harmful ways," ERLC President Russell Moore said in a statement on the provision.
Churches have long been required to file IRS Form 990-T as long as they generate unrelated business income. The new law, Section 512(a)(7), will now require many more churches and tax-exempt organizations to file the form because the federal income tax is now applied to parking benefits.
The coalition argued in their letter sent to members of Congress, that churches and nonprofits stood to lose about $1.7 billion in 10 years as a result of the new tax.
The new guidance from the Treasury Department allows tax-exempt and taxable employers to use any reasonable method for 2018 to determine the increase in unrelated business income as well as a safe harbor method that should minimize the burden on affected employers.
It was noted by the agency, however, that many tax-exempt organizations do not exceed the $1,000 threshold for paying unrelated business income and would not be required to report unrelated business income or pay the applicable tax.
While grateful for the gesture from the Treasury Department, the National Association of Evangelicals said on Wednesday that Congress still needed to repeal the parking tax provision, arguing that while the burden of the tax is reduced, it is still redirecting resources from their missions.
“Congress, the ball is in your court. Treasury has done its best; it is up to you to repeal this tax. Please do this before you go home for Christmas,” said NAE Vice President Galen Carey.
