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Churches Targeted in New Parking Tax

parking tax

A petition opposing a new parking tax on churches and other ministries is quickly gaining signatures. As of Friday afternoon, more than 1,800 people had signed an online petition calling for its repeal.

The new tax was recently uncovered in Tax Cuts and Jobs Act passed by Congress six months ago. The largely hidden provision requires churches and other nonprofits to begin paying a 21 percent tax on employee benefits including parking, transportation and other related benefits. The provision will cause churches that are nonprofits to file federal income tax returns and pay unrelated business income tax on the cost of parking provided to employees. While most benefits affected by the new provision are transportation-related, it will also affect meals provided to workers and in some cases gym memberships.

The petition opposing the tax is being circulated by the the Evangelical Council for Financial Accountability (EFCA). EFCA explained in a position statement included in the petition seeking to repeal the provision:

“Tax practitioners who have evaluated Section 512(a) (7) generally believe that the result of this new provision is that tax‐exempt organizations that provide parking to their employees will be subject to unrelated business income tax on the cost of the parking provided. A nonprofit organization that simply allows its employees to park in a parking lot or garage that is part of the organization’s facilities will be subject to a tax on the cost of the parking provided.”

New Parking Tax Will Be Costly

EFCA estimates that the cost of compliance for churches and nonprofits could run into the tens of thousands of dollars annually.

Dan Busby, president of ECFA, has noted not only financial, but also administrative burdens connected to this provision. He told Christian Post that to file “a form 990-T that they’ve never even heard of” small churches are going to need costly professional help. “It’s just a ridiculous provision that was put in the law,” he said.

According to EFCA, the new tax appears to have initially escaped the notice of a number of lawmakers who approved the bill, including those who seek to protect the interests of nonprofits. Now several months later, many charitable organizations are still unaware of the tax. For those that are cognizant of the new requirement, there is a great deal of confusion as to how the tax should even be calculated.

Church Parking Tax Meant to Create Parity

In a recent Politico article, House Ways and Means Committee Chairman Kevin Brady (R-TX) defended the provision because it creates “greater parity” between for-profit and nonprofit organizations.

Michael Batts, ECFA Board of Directors chairman and partner in the accounting firm Batts Morrison Wales and Lee, says the parity Brady speaks of eliminates the intent behind easing government burdens on nonprofits. Batts says, “The whole idea of tax exemption for nonprofit organizations that are doing charitable, religious and educational work is for them not to be on the same playing field as for-profit businesses when it comes to taxes, in order to incentivize the good work they do to make our society better.”

The National Association of Evangelicals (NAE) is also critical of the tax. Galen Carey, vice president of government relations, told Politico, “There’s going to be huge headaches. The cost of compliance, especially for churches that have small staffs or maybe volunteer accountants and bookkeepers—we don’t need this kind of hassle.”

In early June, Rep. Michael Conway (R-TX) introduced legislation to kill the tax.