1. Unrelated Business Income Tax
Internal Auditors Conference
Brandon L. Harrison, Partner
Vavrinek, Trine, Day & Co., LLP

2. New Tax Law Under Tax Cuts and Jobs Act
For organizations that have employees, unrelated business taxable income (UBTI) is increased by new Internal Revenue Code section 512(a)(7). Under section 512(a)(7), UBTI is increased by any amount for which a deduction is not allowable because of section 274 and which is paid or incurred by the organization after December 31, 2017, for any qualified transportation fringe or any parking facility used in connection with qualified parking
Section 274 as enacted under the Tax Cuts and Jobs Act (TCJA) related to the disallowance of entertainment, amusement, recreation and qualified transportation fringe expenses

3. Why Applicable to Community Colleges
Automatically included Foundations, as all not- for-profits are subject to this new tax law
Special provision was put in to make applicable to colleges (Sec 511(2)(b))
State colleges and universities. The tax imposed shall apply in the case of any college or university which is an agency or instrumentality of any government or any political subdivision thereof, or which is owned or operated by a government or any political subdivision thereof, or by any agency or instrumentality of one or more governments or political subdivisions. Such tax shall also apply in the case
any corporation wholly owned by one or more such
colleges or universities.

4. Key Filling/Payment Dates
Fiscal Year 2018
Tax Payment was due November 15, 2018, too late to file extension, but waiver can be requested.
Fiscal Year 2019
If determined the District has liability then estimated payments are due
The 15th of October 2018, December 2018, March 2018, and June 30, 2018
Must pay through the Electronic Federal Tax Payment System (EFTPS) website
Calculation needs to be completed for
both years as soon as possible.

5. Key Questions Do District employees pay for parking?
If they pay for parking, this tax may not be applicable (grey area, subject to interpretation)
Does the District have reserved employee parking?
This is probably a YES for all Districts, then tax is applicable
Does the District foundation have employees or are they employees of the District and reimbursed by the Foundation?
If no foundation employees, this is not applicable to to the foundation but only applicable to the District.

6. Key Questions Continued…
Does the District provide any additional transportation fringe benefits?
Commuter highway vehicle (vanpool)
Transit Passes
Qualified Bicycle Commuting
Carpool expenses

7. Information Needed to Gather
Number of Employees
Number of total parking spaces
Number of reserved spaces
Reserved for employees
Reserved for college use (maintenance, campus police)
Aggregate total Costs related to parking facilities/structures

8. Costs included in UBIT Calculation
Parking Attendants
Security
Parking management
Repairs/Maintenance
Cleaning
Interest
Property Taxes
Utilities
Lease Payments
Trash Removal
Rent
Landscaping of Parking facilities

9. Unrelated Business Income Tax Calculation
The Calculation is a two step process (for most)
The first step is reserved parking spaces disallowance calculation
Second step is the calculation of the employees usage of the remaining available parking spaces

10. Step 1: UBIT for Reserved Employee Spots

11. UBIT Calculation
Reserved Parking Spaces Disallowance (Primary use test)
Step 2: Identify the remaining parking spots in the parking facility and determine whether their primary use is to provide parking to the general public (greater than 50%)
In other words, calculate the number of the employees usage of the remaining available parking spaces

12. Step 2: Primary Use Test

13. Steps 3 and 4
If the college did not meet the primary-use test, proceed to Step 3
Step 3: Calculate allowance for reserved non-employee spots
The cost associated with reserved non-employee spots is exempted from UBIT, as these spots are considered reserved for the general public
Step 4: Allocate expense based on remaining use
Determine percentage of remaining spots
used by employees and multiply by total
parking costs. This amount is reported
as UBIT

14. Final thoughts
If the calculated monthly cost per employee exceeds $260 per month, the excess could be taxable income to the employee
Don’t see this being applicable to Community Colleges

15. District Perspective District’s next steps
Ways to alleviate the tax burden of the District
Geographical locations of parking lots

16. QUESTIONS?
Happy to answer any questions!