For institutions that owed taxes on unrelated business income – including the “Parking Tax” – with a fiscal year (usually May 31 or June 30 for our institutions), there is a bizarre “twist” to the tax rate they paid for fiscal years ended in 2018.




Marathon Bible College (MBC) is a private college exempt under Internal Revenue Code section 501(c)(3) and 170(b)(1)(A)(ii).  They are required to file Form 990 annually.

MBC has a June 30 year end.  They filed their first ever Form 990-T in December 2018 to pay tax due to the “Parking Tax” for the 6/30/18 year.  They used a 21% tax rate applied to the “addition” to unrelated business income for their total parking expenses for employees for the six months from 1/1/18 to 6/30/18.  The tax amount was $241 reported on Form 990-T and paid via EFTPS.

Then, about three weeks ago, they got a refund check (Form 990-T) from the IRS for $35.  So, they called us – baffled – to ask us about why they got this check.

We told them that this has to do with a technicality whereby – in the year of a law change – taxpayers pay tax on a “blended rate” for the 7/1/17 to 6/30/18 tax year – even though the law did not go into effect until January 1, 2018.  Thus, their tax rate was 17.97% versus 21%.  (Based on 184 days in 2017 and 181 days in 2018.)

“That does not make sense,” says MBC.

“Well, technically, it’s the way the law works.  The IRS sent out an update on this in early June 2019.  And, the whole ‘Parking Tax’ does not make sense.”



From IRS Exempt Organizations Update (June 5, 2019):

The IRS reminds Form 990-T Corporate Filers of new tax law provisions that could affect the tax rate applicable to their UBTI. Specifically, fiscal 2017 corporate filers should apply a blended rate to their UBTI for the entire 2017 taxable year, including any UBTI from amounts paid or incurred after December 31, 2017 that increase UBTI under new Section 512(a)(7).

The Tax Cuts and Jobs Act (TCJA) introduced a flat 21 percent corporate tax rate for tax years beginning after December 31, 2017. However, corporations with fiscal tax years beginning in 2017 and ending in 2018 calculate their tax by blending the rates in effect before 2018 with the rate in effect after 2017. An exempt organization that’s a corporation with a 2017 fiscal year calculates its tax liability by applying the pre-2018 rate and the post-2017 rate to the corporation’s taxable income for the entire tax year. It prorates those amounts based on the number of days in each period relative to the total days in the tax year. The sum of those results yields a blended rate. The blended rate may be greater or less than the corporate tax rate of 21 percent.



  • The “Parking Tax” went into effect on January 1, 2018.
  • IRS Notice 2018-99 gave initial guidance on the “Parking Tax” and the IRS is currently working on proposed regulations that take into account the myriad comments received from the public on this law.
  • Exempt organizations that are corporations should have applied a “blended tax rate” for unrelated business income for fiscal years beginning in 2017.
  • The IRS has – belatedly – sent out an “Update” that clarified this treatment in June 2019.


Specific questions? Email Dave Moja

The information provided herein presents general information and should not be relied on as accounting, tax, or legal advice when analyzing and resolving a specific tax issue. If you have specific questions regarding a particular fact situation, please consult with competent accounting, tax, and/or legal counsel about the facts and laws that apply.

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