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Updated 1/3/2019 

Notice 2018-99, released Dec. 10, addresses a provision of the Tax Cuts and Jobs Act (TCJA) that requires tax-exempt employers to characterize the cost of employee transportation fringe benefits as unrelated business taxable income (UBTI), effective January 1, 2018. 

The notice states that the Treasury Department and the IRS will issue proposed rules governing the determination of parking expenses and the calculation of increased UBTI attributable to qualified transportation fringes but that taxpayers can rely on the interim guidance in the notice in the meantime.

The notice allows employers to utilize “any reasonable method” to determine the cost of providing employee parking.  Another option is to use the safe harbor method provided in the notice.

Determining “Amounts Paid or Incurred” for Employee Parking

If an employer pays a third party for employee parking spots, the cost of parking is the amount paid to the third party. Also, in determining the amount of an employer’s expenses, several expenses are taken into account, such as repairs, maintenance, insurance, property taxes, and security. Among the several types of expenses not permitted to be taken into account are depreciation expenses and expenses related to property located next to the parking facility, such as landscaping or lighting.

The notice sets forth a four-step safe harbor intended to help employers identify expenses related to employee parking:

1) Determine the number of reserved employee spots as a percentage of total parking spaces. For exempt organizations, that percentage is counted as UBTI.

2) Count the remaining parking spots. If more than 50 percent of the spots can be used by the public, none of the expenses attributable to the rest of the parking facility are considered UBTI.

3) Determine how many spots are reserved for customers and other non-employees. This percentage of total parking expenses is not considered UBTI.

4) If there are spots left over after the first three steps, the employer must use a reasonable method to determine employee use during normal business hours on a normal day.

The notice states that employers with reserved employee parking spots have until March 31, 2019, to remove the reserved designation, and the removal will be effective retroactive to January 1, 2018.

Also, if an exempt organization’s gross income from UBTI is less than $1,000, the organization does not need to file Form 990-T, “Exempt Organization Business Income Tax Return.”

While Notice 2018-99 was intended to help employers comply with the tax, it does not address many of the issues and questions related to the new parking tax and does not address transit benefits at all. 


Repeal of the parking tax provision is included in a discussion draft of a technical corrections bill published Jan. 2, 2019—the last day the House Ways and Means Committee was chaired by Kevin Brady (R-TX). As the new leadership in Congress begins its work, NACUBO, along with other nonprofit organizations, supports the repeal.


Mary Bachinger

Director, Tax Policy


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