ISSUE:

It looks like the infamous “Parking Tax” in Internal Revenue Code Section 512(a)(7) is positioned by be repealed by Congress… film at 11.  (**Barring any political shenanigans.)

 

 

SITUATION:

Denali Christian College (DCC) is a private college exempt under Internal Revenue Code section 501(c)(3) and 170(b)(1)(A)(i).  They are required to file Form 990 annually.

DCC has been closely following the new “Parking Tax” provisions.  They have run calculations to discern how much they might owe when specific guidance is released.  From their projections, they believe that they may owe about $22,500 annually in tax.

The CFO at DCC calls us to ask whether they should make an estimated payment at December 15, 2018 for the imputed “Parking Tax” for their tax year ended June 30, 2019.

“That’s an interesting question,” we say.  “It probably makes sense to hold tight for now.  First, the IRS has been talking about potential penalty relief for 512(a)(7) taxes until after specific guidance is provided (it has not to date).  Second, there now six bills in Congress that seek to repeal this tax.  Third, hot off the press – last week, an amendment to a current House bill (see below) seeks to make I.R.C. Section 512(a)(7) ‘go away.’”

RULES:

From “Manager’s Amendment” to the “Year End Tax Package” (Rules Committee Print 115-85):

TITLE VI—EXEMPT ORGANIZATIONS
SEC. 601. REPEAL OF INCREASE IN UNRELATED BUSINESS

TAXABLE INCOME BY DISALLOWED FRINGE.

(a) IN GENERAL.—Section 512(a) is amended by striking paragraph (7).

(b) EFFECTIVE DATE.—The amendment made by this section shall take effect as if included in section 13703 of Public Law 115-97.

Editorial note: This would generally make I.R.C. 512(a)(7) “disappear” as if it never happened.

 

BOTTOM LINE:

  • Hopefully, you have been following the “Parking Tax” issue in “Tax Tips” and assessing what effects – if any – it may have upon your institution.
  • The “Parking Tax” has been a significant issue for institutions in 2018.
  • Although we are not ready to get out the pompoms and chant V-I-C-T-O-R-Y yet, repeal does appear imminent.
  • Until we get a repeal, alteration, and/or specific guidance, your institution should be working with your tax advisor to discern what actions – if any – you should be taking.

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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