In IRS Notice 2018-99, the IRS provides guidance for implementing the new unrelated business income tax on qualified transportation fringe benefits, including employer-provided parking, provided by nonprofit organizations, including churches. The analysis remains straightforward for nonprofit organizations that provide a qualified transportation fringe benefit by paying a third party. The nonprofit organizations will pay unrelated business income taxes on the expense associated with providing the benefits excluded from the employee’s taxable income. Therefore, churches providing mass transit passes or parking fees paid to third party vendors will report these expenses as unrelated business income on Form 990-T.
Since the enactment of the law, great confusion has surrounded its application when a church owns its general parking lot that is a part of or adjacent to the church’s worship facilities. The Notice provides a potential 4-step analysis for owned (or leased) parking lots. But before starting the analysis, a church should determine: