The IRS recently released final regulations (TD 9939) on the elimination of deductions for employee parking and other qualified transportation fringe (QTF) benefits. The final regulations substantially adopt proposed regulations issued in June, but make some changes in response to taxpayer comments. For more details on the proposed regulations, see our prior coverage.
The final regulations clarify several definitions provided in the proposed regulations. Other notable changes include extending the 5% optional rule for allocating certain mixed parking expenses to the general rule for calculating the disallowance of deductions for QTFs, clarifying that a taxpayer who chooses to apply the 5% optional rule is not required to apply the rule to allocate all eligible mixed parking expenses and providing that the Section 274(l) disallowance does not apply to Section 162(a)(2) business expenses paid or incurred while traveling away from home.
The final regulations also provide that the deduction disallowance generally should not apply to expenses for parking that has no objective value, such as parking in industrial, remote or rural areas (i.e., areas where the general public would not pay to park), provided the employer can demonstrate that the fair market value of the parking is zero. In response to COVID-19, the final regulations also offer taxpayers affected by a federally declared disaster a number of special rules, including the flexibility to determine the primary use of parking spaces used by employees during a “peak demand period.”
The final regulations generally apply to tax years beginning on or after their publication in the Federal Register, but taxpayers may choose to apply them to tax years ending after Dec. 31, 2019.
Contacts:
Jeff Martin
Partner
Washington National Tax Office
Washington, D.C.
Tax professional standards statement
This content supports Grant Thornton LLP’s marketing of professional services and is not written tax advice directed at the particular facts and circumstances of any person. If you are interested in the topics presented herein, we encourage you to contact us or an independent tax professional to discuss their potential application to your particular situation. Nothing herein shall be construed as imposing a limitation on any person from disclosing the tax treatment or tax structure of any matter addressed herein. To the extent this content may be considered to contain written tax advice, any written advice contained in, forwarded with or attached to this content is not intended by Grant Thornton LLP to be used, and cannot be used, by any person for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.
The information contained herein is general in nature and is based on authorities that are subject to change. It is not, and should not be construed as, accounting, legal or tax advice provided by Grant Thornton LLP to the reader. This material may not be applicable to, or suitable for, the reader’s specific circumstances or needs and may require consideration of tax and nontax factors not described herein. Contact Grant Thornton LLP or other tax professionals prior to taking any action based upon this information. Changes in tax laws or other factors could affect, on a prospective or retroactive basis, the information contained herein; Grant Thornton LLP assumes no obligation to inform the reader of any such changes. All references to “Section,” “Sec.,” or “§” refer to the Internal Revenue Code of 1986, as amended.
More tax hot topics
No Results Found. Please search again using different keywords and/or filters.