At this point, if your institution has any parking spots that are reserved for employees, you will have an “increase in UBTI under § 512(a)(7)” and likely be required to file Form 990-T and pay some tax – even if you do not have any unrelated business activities.



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 rents a 4,000 square foot building from a church for $3,500 per month.  This lease includes an adjacent paved parking lot with 44 spaces.  In addition, MBC has a dirt parking lot on land they own across a small road from the paved lot.  This lot has 22 spaces – all reserved for faculty and staff.  MBC did not “re-designate” those spots by March 31, 2019.  “During the normal hours of their activities on a typical day,” MBC has 24 employees who park in the lots.

Three times a year, due to heavy rains, MBC has this dirt parking lot graded to ensure proper drainage (akin to snow removal in other climes).  The cost is $800 per grading.  In addition, on their own, MBC paid $1,900 to have the 44-spot parking lot re-striped.

Pursuant to IRS Notice 2018-99, MBC must – under Step 1 of the Notice – “determine the percentage of reserved employee spots in relation to total parking spots and multiply that percentage by the taxpayer’s total parking expenses.”  Because “total parking expenses” include rent or lease payments or a portion of a rent or lease payment (if not broken out separately), MBC “may use any reasonable method… to determine the amount of… the increase in UBTI under § 512(a)(7).”

So what might be a reasonable method of figuring out how much of their lease payments should be allocated to parking costs?  Well, there may be a reasonable way to look at your rent payment and allocate a percentage or amount to parking.  Remember, the “value” of the parking is not what we are looking at.  Another method might be to ask your landlord what they spent on the parking facilities and then use a square footage methodology to ascertain your institution’s share of those costs.  Again, consider whether the amounts are reasonable.  In MBC’s case, they have a separate lot as part of their lease, thus they got the amount of “total parking expenses” on that lot alone from their landlord and added the $2,400 in annual grading (from the dirt lot) to that amount in order to come up with their “total parking expenses.”

Allocated “rental parking” from landlord (church):

For MBC, this meant that their “total parking expenses” were:

Thus, MBC’s tax – as reported on Form 990-T would be:

Then, for “Primary use test” in Step 2 of the Notice, MBC would show a primary use of providing parking to the general public.  This is calculated by taking the 2 employees not included in Step 1 above (24 – 22) as the numerator and the 44 remaining spots (66 – 22) as the denominator for an employee parking percentage of 9.09%.  Because this percentage is less than 50% (thus the “general public” parking percentage is greater than 50%), MBC can stop the four-step process.



From IRS Notice 2018-99:

The principles illustrated in examples 1 through 8 above apply to tax-exempt organizations. Accordingly, the amount of the deduction disallowed under § 274(a)(4) for each entity would, in the case of a tax-exempt organization with the same relevant facts, be the increase in UBTI under § 512(a)(7).

The taxpayer must then determine the percentage of reserved employee spots in relation to total parking spots and multiply that percentage by the taxpayer’s total parking expenses for the parking facility. The product is the amount of the deduction for total parking expenses that is disallowed under § 274(a)(4) for reserved employee spots.

For purposes of this notice, “total parking expenses” include, but are not limited to, repairs, maintenance, utility costs, insurance, property taxes, interest, snow and ice removal, leaf removal, trash removal, cleaning, landscape costs, parking lot attendant expenses, security, and rent or lease payments or a portion of a rent or lease payment (if not broken out separately). A deduction for an allowance for depreciation on a parking structure owned by a taxpayer and used for parking by the taxpayer’s employees is an allowance for the exhaustion, wear and tear, and obsolescence of property, and not a parking expense for purposes of this notice.



  • The “Parking Tax” has not been repealed (although Congress keeps talking about it) and your institution should be using the four-step process in IRS Notice 2018-99 to determine if you must file Form 990-T (possibly for fiscal years ending in 2018) and owe some taxes.
  • The March 31, 2019 deadline for “re-designating” parking spots reserved for employees has passed and taking down signs or repainting labels in order to utilize the “retroactive treatment” is no longer an option.  (“Re-designating” could still work prospectively.)
  • We see many higher education institutions that will owe tax due to a fact pattern much like the MBC example above.
  • If you have no other sources of unrelated business income and – after doing the “Notice 2018-99 math” – your “increase in UBTI under § 512(a)(7)” is less than $1,000, your institution may not have to file Form 990-T.

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.

© 2019 Christian College Resources, Inc.