Tuesday, December 11, 2018
Treasury Issues Interim Guidance (and Request for Comments) on Calculation of UBTI from Qualified Transportation Fringe Benefits.
In Notice 2018-99, issued yesterday, Treasury issued interim guidance on how to calculate the increase in unrelated business taxable income resulting from an exempt organization's provision of qualified transportation fringe benefits under newly enacted 512(a)(7). The notice states that Treasury intends to issue proposed regulations on the topic, but "until such guidance is issued . . . tax-exempt organizations that own or lease parking facilities where their employees park may use any reasonable method . . . to determine the amount of the increase in UBTI under 512(a)(7)." Rather significantly, the Notice allows an organization to use a net loss from an actual unrelated trade or business to offset the increase in UBTI under 512(a)(7) if the organization has only one real unrelated trade or business (i.e., one unrelated business without regard to 512(a)(7)). There is a lot of aggravating detail in the Notice relating to one such "reasonable method," but fortunately the Notice includes helpful examples.
For interesting commentary on 512(a)(7) and the interim guidance, mostly unfavorable, see this article in Accounting Today. Public Comments are solicited with regard to the Notice and should be submitted by February 22, 2019.