Saturday, January 5, 2019

Hey Fletch … Do I need to pay unrelated business income tax on my parking lot? I heard a lot of noise about this last fall but what was the final ruling?

DRF—The law hasn’t changed on non-profits, including churches, paying unrelated business income tax (UBIT) on parking spaces. What has changed is that in mid-December 2018, the Treasury released rules on how to interpret the law. 

Frank and Elaine Sommerville wrote a concise article that explains if you are required to pay the tax. They note that:

The basic premise of the IRS analysis is to determine if most of the parking spaces are utilized for employees or for the “general public.” Spaces at a church that are not used during the week may be considered as for the “general public” unless they are designated for employee use only. If the majority of the spaces are utilized or available for the general public, then the church does not have unrelated business income.

There are four steps that a church needs to work through. Their article does a masterful job of walking through those steps.

For most churches that own their own parking lots, and that don’t reserve spots for staff, there will not be any tax to pay. However, like Alcoholics Anonymous, you need to work the steps to stay clean!