Before the 2017 tax reform act (the Act), employers could deduct expenses for providing qualified transportation fringe benefits (QTF) to their employees. For amounts paid or incurred after December 31, 2017, unless otherwise noted below, the Act eliminates the deduction for expenses for QTFs. Tax exempt organizations must treat these expenses as unrelated business taxable income.
The IRS recently issued Notice 2018-99, which provides transitional guidance on determining the amount of qualified parking expenses subject to disallowance or inclusion in income. The notice provides that taxpayers may rely on the interim guidance pending publication of proposed regulations.
This Insight discusses the interim guidance relating to the deduction disallowance. A separate Insight will discuss the application of the guidance to tax exempt organizations.
The Act left unclear how taxpayers should determine the expenses that were subject to the deduction disallowance for qualified parking provided by a taxpayer to its employees. Notice 2018-99 provides welcome guidance on these issues.