Tax Implications of the Employee Parking Benefit under the TCJA

When the Tax Cuts and Jobs Act (TCJA) was signed into law in 2017, it no longer allowed businesses and non-profit organizations to deduct most Qualified Transportation Fringe (QTF) benefits as a business expense. The controversial provision includes perks such as free or subsidized parking at work, transit travel costs, and expenses related to bicycling to work. Non-profits must now add these costs to their unrelated business taxable income (UBTI).

Because the provision went into effect for the 2018 tax year, most businesses and non-profits have already experienced and digested its ramifications. There is no indication that organizations stopped offering commuter-related employee benefits en masse because of the new law, particularly since some larger municipalities require employers to subsidize the money their people spend using public transportation to get to work. But many companies and charities have reconsidered the way they provide parking to employees to ensure that they receive the most advantageous tax treatment under the new law.