Today, the U.S. Department of the Treasury and Internal Revenue Service issued guidance with regard to how nonprofits comply with a new provision of federal tax law that imposes a new tax on nonprofits that provide transportation or parking fringe benefits to their employees. The new tax was passed as part of the Tax Cuts and Jobs Act passed last year.

With the potential of costing synagogues, Jewish day schools and a host of other nonprofits tens of thousands of dollars annually, the Orthodox Union has been among those leading a coalition effort to have Congress repeal this tax. Repeal legislation has been introduced in Congress and may be voted on by the House of Representatives this week.

The Orthodox Union also led discussions with Treasury officials asking they delay or mitigate the imposition of this tax which would cost the charitable sector $1.7 billion over the next decade. Today’s Treasury Dept. guidance indeed mitigates some of this adverse impact. [Read the Orthodox Union’s letter to Treasury Secretary Steven T. Mnuchin here.]

As stated by Treasury, a key part of this guidance is a special rule, enabling many employers to retroactively reduce the amount of their nondeductible parking expenses. Under this rule, employers will have until March 31, 2019, to change their parking arrangements to reduce or eliminate the number of parking spots they reserve for their employees. By making this change, many synagogues, schools and other tax-exempt organizations may reduce or eliminate their tax liability and may avoid having to file a form with the IRS.

But the guidance does not fully resolve the matter and many charities remain exposed to a new and harmful tax liability.

Nathan Diament, the Orthodox Union’s executive director for public policy, stated:

“We appreciate the responsiveness of the Treasury Department leadership to our concerns about the harm the new tax on nonprofits would bring upon America’s charities. We appreciate how the guidance mitigates the problem. But Congress must still act and repeal the tax to fully solve the problem for all of America’s charities. We will continue to work with our allies in Congress to pass that repeal.”

Orthodox Union President Mark (Moishe) Bane stated:
“America’s charities must be supported, not harmed, by government policy. The guidance issued today is a step back to that proper policy approach. We will continue to work for the full repeal of the new tax on charities.”

The full Guidance can be read here:
https://www.irs.gov/newsroom/irs-issues-guidance-for-determining-nondeductible-amount-of-parking-fringe-expenses-and-unrelated-business-taxable-income-provides-penalty-relief-to-tax-exempt-organizations