Impact of Unrelated Business Income Tax on Reserved Parking Spaces
Learn about the impact of Unrelated Business Income Tax (UBIT) on parking spaces reserved for employees in non-profit organizations like universities. Discover how new tax legislation affects UBIT calculation and the estimated tax liability for individuals or departments holding reserved numbered spaces.
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Presentation Transcript
Unrelated Business Income Tax (UBIT) Impact on Reserve Numbered Spaces Transportation Services Advisory Committee October 2, 2019
Definition Any Non Profit, such as a university, can generate and pay income tax when engaging in unrelated business operations that generate profit. This income tax is called Unrelated Business Income Tax or UBIT. IRS has determined that providing parking is a benefit to employees and unrelated to a non profits business.
How did we get here? With new tax legislation in effect January 2018, IRS code changes can now impact a non profit s Unrelated Business Income depending on how parking assets are allocated and if a pre tax credit for parking costs is provided to employee s by the entity. Per President Young, any taxes related to pre tax benefits will be provided for by other university funds - one year commitment. However, those spaces assigned to employees will still generate unrelated business income. The tax liability for this will passed on to the permit holder or department.
How do Reserved Numbered Spaces generate UBIT? If more than half the university s parking spaces were reserved for employees, the cost of providing all space would generate unrelated business income subject to tax at 21%. At TAMU this is not the case, therefore only spaces assigned specifically to employees generate UBIT. These are the reserved numbered spaces (RNS) purchased by the individual or department and assigned to an individual. Faculty/Staff lots that open to other uses after 5pm do not count in the calculation. The estimated annual cost of TAMU RNS spaces assigned to individuals is $307,621 generating an estimated tax of $64,600 or a tax of approximately $45 per permit.
Estimated Impact of Covering the Tax Liability RNS Priority Bay 835.00 $ 879.96 $ 888.96 $ RNS Surface 657.00 $ 701.96 $ 710.96 $ RNS Garage 747.00 $ 791.96 $ 800.96 $ FY 2021 Price Increase to Cover New Liability 2020 Recapture $9.00 5 years
Six Year Estimated Rate Schedule (All Factors held Constant) RNS Priority Bay 888.96 $ 915.35 $ 942.54 $ 970.55 $ 999.40 $ 1,020.11 $ RNS Surface 710.96 $ 732.01 $ 753.70 $ 776.05 $ 799.06 $ 813.76 $ RNS Garage 800.96 $ 824.71 $ 849.19 $ 874.39 $ 900.35 $ 918.09 $ FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 FY 2026
Things to Consider This is only an estimate, there are several factors that could change this. The law could be changed by congress. These estimates are based on FY 2018 expenditures. When FY 19 UBIT is calculated, TAMUs liability could increase or decrease. Future liability could fluctuate due to changes in space inventory as well as the greater expense of structured parking. (i.e. Campus Master Plan)
