Redpath and Company Announces 2024 Partner and Director Promotions
St. Paul, Minnesota (October 1, 2024) – Certified public accounting firm Redpath and Company (Redpath) has promoted Sarah Gengenbach to partner and...
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Ashley Rehn, CPA : December 18, 2018
December 18, 2018 — The tax-exempt sector has received the much-anticipated interim guidance from the Internal Revenue Service regarding the application of qualified transportation fringe (QTF) benefits. Under this interim guidance, many tax-exempt organizations will now be required to pay unrelated business income tax. While this is not the relief the tax-exempt sector was expecting, there are continuing advocacy efforts to minimize the effects of the new regulations.
Until further guidance is issued, we recommend every tax-exempt organization, including organizations exempt from filing a form 990, review the following details and ensure compliance with the new QTF benefit treatment.
The Tax Cuts and Jobs Act, passed in 2017, disallowed a deduction for expenses of QTF benefits paid by taxpayers for the benefit of their employees. As part of this Act, a new code section was added that requires tax-exempt organizations to include the disallowed QTF expenses as taxable unrelated business income. In response, tax-exempt organizations and practitioners have submitted their concerns and recommendations to the IRS. The remainder of this article summarizes the interim guidance provided by the IRS in notice 2018-99 and 2018-100.
Ensure you can answer the following questions:
If the total expense of transportation or parking expenses exceeds $1,000 for any tax year, or a portion of a tax year after December 31, 2017, you may be required to file a form 990-T and pay the unrelated business income tax.
Act now to determine what your organization’s filing requirements are and prepare to pay the tax due. The IRS has provided the following transitional relief:
The IRS has defined what constitutes a qualified transportation fringe benefit, parking facility, and parking expenses, and provided clear exclusions from taxability along with a step-by-step process for determining applicability. These key details are summarized below. We recommend that you review these details and their specific applicability to your organization with your tax advisor.
Qualified transportation fringe (QTF) benefits include:
Determining the amount of QTF parking
Parking facility: includes indoor or outdoor garages and other structures, as well as parking lots and other areas, where employees may park on or near the business premises or near a location an employee may commute from. Aggregation of multiple parking facilities in a single geographic location is permitted, however multiple parking facilities in separate geographic locations may not be aggregated.
Parking expenses: include, but are not limited to, repairs, maintenance, utility costs, insurance, property taxes, interest, snow and ice removal, leaf removal, trash removal, cleaning, landscape costs, parking lot attendant expenses, security, and rent or lease payments for the portion applicable to a parking facility (which should be allocated if not broken out separately). *Note, an allowance for depreciation of a parking structure is not considered a parking expense. Expenses paid for items not located on or in the parking facility, such as landscaping and lighting are also not included.
The IRS provided the following exclusions:
This article is a brief overview of the recently published interim guidance.
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