Is Your Ministry’s Parking Lot Costing You Money?
The tax reform package that went into effect in December of 2017 had a lot of good things in it, but one thing we didn’t hear anything about was the Nonprofit Parking Tax that was hidden within it. It’s in Section 512(a)(7) of the Internal Revenue Code, which was added by the Tax Cuts and Jobs Act.
While Congress was touting tax savings that individuals and corporations would see, there was no mention of a tax on churches and nonprofits who provide parking for their employees—a parking garage or just a parking lot.
This new income tax on churches and charities will tax ministries and nonprofits on parking provided to employees. This new tax is inappropriate and will be burdensome and costly for churches and charities.
The total number of church and nonprofit employees in the U.S. is approximately 15 million. That is 15 million parking spaces.
Unless something is done to mitigate this issue, there will be a 21 percent income tax—yes, an income tax on churches and other nonprofits—and then there is the cost of preparing Form 990-T’s (Unrelated Business Income Tax form), the administrative effort required to file the annual form, and more. The overall impact of this law is absolutely staggering.
The government is holding firm in their position that for-profits and nonprofits should be treated equally with respect to employee parking benefits. Since nonprofits don’t pay income tax, a 21% tax was created on the value of some of the nonprofit employees’ benefits.
What is wrong with this position? The very purpose of tax exemption for nonprofits is NOT to have their charitable, religious, and educational activities on the same footing as taxable businesses because of their important work and the inherent challenges associated with raising money to support that work.
Additionally, the federal income tax on unrelated business income is intended to apply to income generated from unrelated commercial activated conducted by nonprofits. Providing parking to employees does not constitute generating income from an unrelated commercial activity and there is no sound policy basis for applying a tax intended for commercial activity to the essential element of parking by employee of a church or other nonprofit.
If you are concerned about the Nonprofit Parking Tax, you could reach out to Chairman Brady and Chairman Hatch with a message along these lines: “There is a new income tax on churches and charities in the tax reform law that taxes us on parking we provide to our employees. It’s in Section 512(a)(7) of the Internal Revenue Code, which was added by the Tax Cuts and Jobs Act. This new tax is inappropriate and will be burdensome and costly for churches and charities. Please help repeal this new tax on nonprofit employee parking.”
First Priority Contacts:
Congressman Kevin Brady (R-TX)
Chairman of the House Ways and Means Committee
Texas 8th District
1011 Longworth House Office Building
Washington, D.C. 20515
Senator Orrin Hatch (R-UT)
Chairman of the Committee on Finance
Utah 1st District
104 Hart Office Building
Washington, DC 20002