Taking the Sting Out of a New Tax on Nonprofits

Taking the Sting Out of a New Tax on Nonprofits

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Under the 2017 tax law, some churches, charities and other nonprofit organizations are being hit with a new tax on the value of transportation benefits provided to employees, including free parking. The Treasury Department has said it can’t repeal or delay the tax on its own, but on Monday it offered new guidance that provides a way for some nonprofits to avoid the tax altogether. 

The new tax created by last year’s law was part of an effort to equalize the treatment of for-profit and nonprofit groups. It has been roundly criticized by nonprofit groups across the country.

The new Treasury Department workaround allows nonprofits to simply remove reserved spots in their parking lots by taking down signs. This could be particularly beneficial for churches and other religious organizations, The Wall Street Journal says.

Here’s an example from the Journal of how it could work:

“[C]onsider a church with a 500-space parking lot where 50 spaces are reserved for employees and the remainder are open for parishioners. The church would have to pay taxes on 10% of its costs. But every reserved-parking sign the church removes between now and March 31 could reduce its tax bill. Once the taxable income goes below $1,000, nonprofits don’t owe tax and don’t have to prepare a special return.”

Not everyone is happy with the latest guidance, however. David Thompson of the National Council of Nonprofits told the Journal that the rules were too complicated. “Repeal of the provision is the only reasonable response,” he said.