What’s the tax impact of the TCJA’s elimination of the transportation fringe benefits deduction?

The IRS issued some interim guidance around the treatment of qualified transportation fringe benefit expenses, paid or incurred after December 31, 2017.

The new rules assist employers in determining the amount of parking expense that’s no longer tax deductible, as well as assist tax-exempt organizations how these nondeductible parking expenses create or increase unrelated business taxable income (UBTI).

“A key part of this guidance is a special rule, enabling many employers to retroactively reduce the amount of their nondeductible parking expenses. Under this rule, employers will have until March 31, 2019, to change their parking arrangements to reduce or eliminate the number of parking spots they reserve for their employees. By making this change, many churches, schools, hospitals and other tax-exempt organizations may be able to reduce their associated UBTI. In some cases, the organization may avoid having to file a Form 990-T, Exempt Organization Business Income Tax Return, altogether. Such a change made in parking arrangements will apply retroactively to Jan. 1, 2018.”

For full details, read IR-2018-247 on the IRS website.

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