Unrelated Business Income Tax on Transportation Fringe Benefits (August 7, 2018)


The Church Alliance submitted a comment letter to the Treasury Department and Internal Revenue Service ("Service"), addressing the recent enactment of a new tax on parking and other transportation fringe benefits provided by tax-exempt organizations to their employees. The letter is a follow-up to the June 26, 2018 letter described below, and addresses interpretations or relief that Treasury and the Service might consider to avoid unnecessary or unintended burdens, particularly for small churches that may provide parking for employees. The Church Alliance encouraged Treasury and the Service to consider three approaches. (1) Parking provided primarily for congregants should not be considered a fringe benefit at all, particularly if the fair market value of the parking would be considered $0. (2) Code Section 512(a)(7) should be interpreted not to "increase" unrelated trade or business income of an organization that does not otherwise have any such income, particularly where the marginal cost of the parking for employees is $0. (3) It might be in the best interest of sound and efficient tax administration to grant an exception to Code 512(a)(7) where the costs of compliance would greatly exceed the revenue generated by taxing small nonprofits such as churches.