Parking Tax Repealed

book that says "tax law"By Jim Sayre, CAPP

On December 20, the so-called “parking tax,” more formally known as Section 512(a)(7) of the IRS code, was repealed. This tax was enacted as part of the Tax Cuts and Jobs Act in 2017 and was imposed on “qualified transportation fringe benefits.” In many cases, this was a significant new expense for nonprofits, including universities. For my institution, it was a multi-million-dollar per-year expense for which we hadn’t planned.

The interpretation of the law varied widely. In some cases, the entirety of the value (net cost to the employer to provide parking and/or transportation) was interpreted as being taxable, and in some cases, organizations interpreted the law as simply applying to pre-tax deductions that were offered for parking or transportation. At my former institution of employment, the interpretation was that the 21 percent tax included the value of the subsidy to employees to park. In all cases, the tax no longer applies. In fact, if you paid actual or estimated taxes, your non-profit organization is owed a refund, as the repeal is retroactive. It’s my understanding that the IRS will soon release instruction on how to claim said refunds.

Please know that I’m not an expert on the subject, so I’d encourage you to reach out to your tax attorney or other organizational resource if you have questions.

Jim Sayre, CAPP, is executive director, parking and transportation, at the University of Arizona.