Managing the added expenses involved with reopening your church
To put this provision in the proper context, it’s helpful to understand fringe benefits. Generally, compensation and benefits provided by employers to employees are taxable. There are a few exceptions to this general rule, including fringe benefits outlined in section 132 of the Internal Revenue Code. One of the taxable fringe benefits is the “qualified transportation fringe” which includes any of the following:
Many churches and nonprofit organizations are not aware of the tax, which could cost them tens of thousands of dollars annually. It will be a financial burden, as well as an administrative one, since it will cause them to file Form 990-T, the Exempt Organization Business Tax Return. For those churches and nonprofits that are aware of the new requirement there is confusion as to how the tax should be calculated. For example, churches are asking how they are supposed to calculate the value of parking spaces for employees. And some are questioning if the garages provided as part of clergy residences are now taxable.
The Treasury is working on regulations spelling out the details of how the tax will work, even though the affected groups should already have been paying the quarterly tax which took effect January 1, 2018. In addition, legislation was introduced in June to rescind this particular tax provision. The Church Alliance (a coalition of the chief executive officers of 38 church benefits organizations), in which MMBB is a member, is advocating to have churches exempted from the tax and the filing requirement. We will keep you updated on any developments with respect to this situation.
1The term ‘qualified parking’ means parking provided to an employee on or near the business premises of the employer or on or near a location from which the employee commutes to work by transportation in a commuter highway vehicle, or by carpool.Back to Financial Resource Center
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