New Internal Revenue Code Section 512(a)(7) is causing quite an outcry, let’s review some possible “UBIT Parking Trigonometry” this week.

**If you would like to check out “Qualified Parking as UBIT, Part 3” please go to:


Denali Christian College (DCC) 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.

The CFO at DCC has been working up some calculations in 2018 on potential UBIT on their parking.  After reviewing “Tax Tips” over the past month, here is what they sent us:

DCC has a parking lot with 400 spaces.  The cost to build 8 years ago was $1,200,000.  It is being depreciated over 15 years.  They lease a surveillance system for $36,000 per year.  DCC estimates the compensation of various security personnel assigned to the parking lot to be $80,000 annually.  In addition, they pay $16,000 for sweeping/cleaning the lot.  They have 100 employees who drive to work and park in the lot.

They tell us, “We are anticipating that ¼ of our parking lot costs will produce unrelated business income under Code Section 512(a)(7).  That calculates to UBIT of $11,340.  And, with a June 30 year end, we’ve missed two estimated payments in March and June of 2018.”  DCC’s ¼ of parking calculation is as follows:

Depreciation =             $20,000

Security comp. =          $20,000

Surveillance =                 $ 9,000

Utilities =                          $ 1,000

Sweeping/cleaning =  $  4,000

TOTAL =                           $54,000

$54,000 x .21 (corporate tax rate) = $11,340 unrelated business income tax

As we await guidance on this important issue, it would appear that – for DCC in this example – they might need to be prepared to report a prorated amount arrived at by a reasonable allocation method of the amount of their annual parking lot costs attributable to the parking spaces normally used by employees.  The example above should meet those criteria.



From I.R.C. Section 512(a)(7):

Unrelated business taxable income of an organization shall be increased by any amount for which a deduction is not allowable under this chapter by reason of section 274 and which is paid or incurred by such organization for any qualified transportation fringe (as defined in section 132(f)), any parking facility used in connection with qualified parking (as defined in section 132(f)(5)(C)), or any on-premises athletic facility (as defined in section 132(j)(4)(B)). The preceding sentence shall not apply to the extent the amount paid or incurred is directly connected with an unrelated trade or business which is regularly carried on by the organization.

From a presentation by a Treasury official at a recent conference:

“This provision is interesting because unlike I think 4960, 4968, some of the other new provisions, this can apply to anybody so there’s going to be small exempt organizations in Kansas that have a parking lot and this provision could hit them pretty significantly. I think that is why we’ve seen a lot of interest in it. It is really not limited at all to the large organizations or complex organizations.”



  • The “Tax Cuts and Jobs Act” added new Section 512(a)(7) which purportedly “imputes” UBIT for exempt organizations who provide certain employee fringe benefits and we are patiently awaiting guidance from the IRS/Treasury on this important tax issue.
  • Your school should be discussing and planning for a “reasonable method of allocation” in the event that you are required to “impute” UBI on employee parking that you provide.
  • Discuss with your team whether the DCC example above might be appropriate to your school’s situation.
  • It is shocking that we do not have more guidance on this issue almost seven months into implementation – IRS: HELP PLEASE!!

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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