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What?! Nonprofits pay tax on employee offered parking??

Yes, you read that correctly!  A hidden provision in the 2017 Tax Cuts and Jobs Act makes employer-provided parking nondeductible.  Because nonprofits don’t generally pay tax to begin with, parking is now considered a taxable event that requires filing of Form 990-T and payment of 21% tax.  Here are a couple examples:

  • NPO pays third-party for employee parking. The payment made to this third-party equates to $100 per month per employee.  Because this amount is below IRS limits, none of it is included as wages on the employee’s W2.  However, it is taxable to the NPO, and a Form 990-T must be filed.
  • NPO owns its parking lot and reserves a certain number of spots for employees only. An allocation must be made to determine the cost of those spots, and a Form 990-T must be filed to pay tax on that amount.

The above examples are simplistic – there are many details for allocating costs in different situations, as well as instances when employer provided parking could be taxable to the employee.  One way to avoid this situation is to never reserve parking spots for employee-only use.  If you choose to offer the benefit, contact our non-profit experts to understand the tax implications.

Jean Smith

Jean joined Ketel Thorstenson, LLP in 1994. She serves as partner in the Audit Department of the Rapid City office. Jean has an infectious, can-do attitude, plus the motivation to make the audit experience a positive one for all clients. Jean has a wealth of experience, specializing in audits of non-profits, financial institutions, tribal organizations, and closely held commercial entities.
Jean Smith

Form 990-T, Non-Profit, Non-profit filing requirements, tax reform, The Tax Cuts and Jobs Act

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