Armanino Blog

Nonprofit Parking Tax Update

by Kelly Gillette, Katy Brown
June 18, 2019

The U.S. House of Representatives’ Ways and Means Committee, which is responsible for setting tax policy, has announced that it will hold a hearing on June 19, 2019, to listen to comments from invited speakers about the impact of the Tax Cuts and Jobs Act’s Section 512(a)(7) on nonprofit organizations. This code section, enacted in December 2017, imposes a tax on nonprofit employers for providing nontaxable commute and parking benefits to employees.

The committee invites public comment to be included in the public record. The deadline for submitting comments is July 3, 2019. We implore you to send your comments on the negative impacts Section 512(a)(7) has had on your organization, such as:

  • Time and effort to learn and understand the law in the absence of authoritative interpretations.
  • Inability to take expenses against fringe-benefit UBTI, putting nonprofit employers in a worse position than for-profit employers, not creating true parity.
  • Diversion of charitable use funds to pay federal taxes, taking away from your organization’s ability to carry out its charitable purpose.
  • Increased costs for professional tax advice and filings.
  • Being asked to pay tax on your property tax expense, which is against general tax principles.
  • State and local agencies require certain employers to offer the pre-tax benefits that 512(a)(7) taxes, which leaves the employer with no way to avoid paying this tax.
  • Employees of nonprofits that discontinue pre-tax commute benefits and choose to make those benefits post-tax are losing income when they are already usually paid less than employees in for-profit markets.
  • Imposition of late filing and late payment penalties for organizations who learned about this law after the initial deadlines wastes charitable-use assets, and the law became effective two weeks after it was passed. There was insufficient time to learn and understand the details of the law prior to its effective date.
  • Absent authoritative guidance, penalty imposition is not equitable for nonprofit organizations.

Please visit the Ways and Means website for full formatting instructions for your statement:

To submit your statement, follow these instructions:

If you have any questions or would like any assistance with this, please let us know. We will be happy to help, and we will be submitting our own statement, as well.

June 18, 2019

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