A holy mess: Churches, other nonprofits confront parking tax – By Brian Faler (politico.com) / Dec 16 2018
Under the Tax Cuts and Jobs Act, the parking benefits that churches, synagogues, hospitals, colleges and other nonprofits offer their employees are suddenly taxable.
Republicans’ tax overhaul is going to have religious leaders across the country suddenly contemplating the finer points of their parking lots.
Under the Tax Cuts and Jobs Act, the parking benefits that churches, synagogues, hospitals, colleges and other nonprofits offer their employees are now taxable. That’s causing headaches for nonprofit administrators trying to figure out complicated new rules that can require them to calculate everything from snow removal costs to what percent of spaces are used by employees. It will likely all end up with pastors losing their reserved spots and competing with the congregation for parking before services.
“All over America — it’s no longer going to say, ‘This space reserved for Pastor Smith,’” predicts Steven Woolf, senior tax policy counsel for the Jewish Federations of North America. “Those signs will be coming down.”
A host of religious groups and other not-for-profit organizations are demanding Congress repeal the provision requiring the new tax.
House Republicans have recently backpedaled and now are proposing to kill the levy as part of a year-end bill — one of the first moves to rescind any part of the massive tax code overhaul that went into effect this year. But it’s unclear whether Congress will approve any more tax legislation before quitting for the year.
Figuring out how much organizations owe is no small task, and the Treasury Department last week unveiled long-awaited rules explaining how exactly the tax is supposed to work, setting off a new wave of confusion.
Though the department says it was trying to minimize the impact on nonprofits, its 24-page guide is nevertheless densely written, thick with acronyms and references to individual sections of the tax code. Nonprofits might need to track everything from the cost of maintaining their parking lots, to their property taxes, to how much they spend on snow removal, to how many of their spots are typically used by employees.
Critics of the tax say it will be difficult for many groups — not used to dealing with the IRS — to understand.
“You have to look up different parts of the tax code to know what they’re even referring to,” said Galen Carey, vice president of government relations at the National Association of Evangelicals. “A volunteer who counts the offering and does the bookkeeping in a local church — they’re not going to know what to do.”
“They’re going to have to hire someone,” he said.
One likely effect of the new rules: a lot fewer reserved spaces. Under the new rules, dumping assigned parking spots is one way a group can reduce its exposure to the tax.
The provision was added to last year’s tax law, because Republicans also took away tax breaks for transportation-related fringe benefits from for-profit companies, and they wanted to treat all employers equally. The 21 percent tax also applies to mass-transit benefits such as subway passes, though the new regulations focus on parking.
In the meantime, nonprofits face the question of how to calculate their parking tax.
It’s relatively easy if an employer is paying someone else — maybe a garage across the street — for their workers’ spots. In that case, the tax is applied to however much is spent on those spots.
It’s been less clear how the tax works when a group owns its own parking lot. How much does it cost a church to provide a spot to a pastor in a parking lot it has owned for 100 years?
Treasury tried to ease the burden by telling groups they could use any “reasonable” method for calculating the tax.
“An employer wants to come up with his own method — they can do that so long as it’s reasonable,” said a senior Treasury official. “That will be acceptable to the IRS.”
The department also explained how organizations might go about it, offering a multi-step process for calculating their bill.
First, they figure out how much they spend on parking in total.
That includes the cost of “repairs, maintenance, utility costs, insurance, property taxes, interest, snow and ice removal, leaf removal, trash removal, cleaning, landscape costs, parking lot attendant expense, security, and rent or lease payments or a portion of a rent or lease payment,” the regulations say. It does not include depreciation or expenses related to nearby property, such as bushes planted alongside a parking lot or lighting.
The groups then have to figure out what share of those costs are attributable to its workers’ spaces.
If they have reserved spots — “by a variety of methods, including, but not limited to, specific signage (for example, ‘Employee Parking Only’) or a separate facility or portion of a facility segregated by a barrier to entry or limited by terms of access” — then those are automatically taxable. So if 10 percent of spaces are reserved for employees, then the tax is applied to 10 percent of the group’s total parking lot costs.
The group then calculates who is using the remainder of the lot. If more than 50 percent is being used by the general public, then they owe nothing more.
But if, say, 80 percent of the spaces are used by the group’s workers, then it owes taxes on 80 percent of their parking lot costs.
Treasury does not expect many churches to have to pay. The agency devised that 50-percent test on the assumption that most churches have relatively few employees and lots big enough to accommodate congregants.
It is also giving groups until March 31, 2019, to remove assigned spacing.
Treasury is also allowing groups providing minimal benefits to skip the tax.
The tax is more likely to affect organizations in urban areas than rural ones because the higher cost of living means parking benefits will cost more — think of a church in Manhattan, for example. Organizations in cities might also have fewer spots for the public, making it harder to meet that 50-percent test.
“I think most churches will not be affected by it, but there will certainly be some that have to pay,” said Mike Batts, managing partner of an accounting firm that specializes in religious nonprofits.
Even if they end up not having to pay, they will still have to do some legwork to figure out where they stand.
“Determining whether an organization is subject to the tax still requires an analysis and, in some cases, that analysis is not simple,” said Batts.
https://www.politico.com/story/2018/12/16/congress-tax-reform-irs-churches-parking-1027598
