Some tax practitioners have alerted churches and other non-profits of the risks of allowing employees to park on church property as a fringe benefit. This in the language of the act could create unrelated business income where none exists and create a tax to the church. Many are asking for a legislative fix. The amendment to Section 512 is specifically targeted to qualified transportation benefits and qualified parking. The Act refers to Section 132 (the section which provides exclusion for fringe benefits). Section 132 is a laundry list of exclusions from income for benefits given to employees. Among them are “no cost added” benefits (which are not unrelated business income). Specifically listed in the regulation are transportation benefits (free air fare for airline employees who fly stand-by). Reg. 1.132-2T. The other problem is that the Section 132 analysis speaks to the value of the qualified parking. Except for urban churches (who rent out their parking lots on weekdays), most churches have free open parking lots used by commuters on rainy days when they catch a bus, parking to talk on a cell phone or to eat lunch, smooching with your love on a dark evening, drinking Ripple so mom and dad don’t see you. In other words the value of the parking is zero. Further, it’s also a “no cost added” fringe benefit in that the parking lot is not used. Additionally with most suburban churches, the cost of street parking is free as well. So, you are not saving anyone anything by allowing them to park there.

So, this section applies only to churches that essentially already have unrelated business income from charging for their parking or who pay the parking of their employees or pay their bus fare and the like. It does not apply in my view to churches that simply have acres of parking which are never filled to capacity and never rented.