“Free Parking” Becomes an Administrative Nightmare
BOMA International is working with members of Congress and the IRS to reverse a section of the Tax Cuts and Jobs Act of 2017 (TCJA) that disallows a deduction for employers who provide parking to their employees.
This legislation maintained many common-sense tax policies for commercial real estate, such as 1031 “like-kind” exchanges, historic preservation tax credit and the expansion of 179 expensing. Unfortunately, not all of tax reform was great for commercial real estate interests. TCJA also disallowed the deduction for employers to provide parking for employees. At first glance, 26 U.S. Code Section 274(a)(4) would seem to only affect employers who pay a third party for parking in a lot, garage or reserved space. However, in late 2018, the IRS issued complex guidance which encompasses all employee parking situations, including tenants who do not pay for their unassigned office parking lots, effectively taxing many employers who have employees that drive to work. The IRS memo also provides incredibly onerous methods for building owners to determine the “cost” per tenant of free parking, including many expenses that are not typically calculated (i.e. landscaping and snow removal).
BOMA is working with members of Congress and preparing information for the IRS on how this undue administrative burden will be impossible to accurately report to our tenants for their compliance.