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Regs aim to clarify parking deduction disallowance

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Tax Hot Topics newsletter The IRS recently released proposed regulations (REG-119307-19) on the deduction disallowance for qualified transportation fringes (QTFs), including qualified parking. The proposed regulations retain much of the guidance provided in Notice 2018-99, but introduce some key changes.

The proposed guidance would expand the definition of “general public” for multi-tenant building parking facilities to include employees, partners, 2% shareholders of S corporations, sole proprietors, independent contractors, clients or customers of unrelated tenants.

In addition to the four-step methodology proposed in Notice 2018-99 for determining the deduction disallowance for employers that own or lease a parking facility, the proposed regulations introduce two simplified methodologies that would utilize the cost per parking space or the monthly amount for parking that employees may exclude from income ($270 per month for 2020).

For employers that lease a parking facility in connection with the lease of a building or other facility used in its trade or business, the proposed guidance would provide a safe harbor rule that allows employers to allocate 5% of the total lease costs towards the parking deduction disallowance.

The proposed regulations would also allow employers to use statistical sampling (following the procedures of Rev. Proc. 2011-42) to determine employee usage of parking spaces when using the above deduction disallowance methodologies.

Contacts:
Jeff Martin
Partner
Washington National Tax Office
T +1 202 521 1526

Keith Mong
Managing Director
Washington National Tax Office
+1 202 521 1554

James Sanchez
Senior Associate
Washington National Tax Office
+1 202 861 4107

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