On December 16, 2020, the IRS issued final guidance on the disallowed deduction of employer-provided transportation fringe benefits under Section 274. While T.D. 9939 largely adopts the proposed regulations issued on June 23, 2020, the final regulations do provide some relief to taxpayers affected by the COVID-19 pandemic.
This issued guidance allows the taxpayer to calculate the disallowed parking fringe benefit deduction by determining the total amount of parking spots utilized by employees on a typical business day during the taxable year.
As an exception to this rule, the IRS is allowing taxpayers affected operationally by the pandemic to choose to make this determination by using a typical business day during a tax year prior to the start of the pandemic. This will create less of a tax burden on organizations affected by COVID-19 by allowing them to use the assumption that their owned or leased parking area is not being utilized primarily by employees.
The final regulations are scheduled to be published in the Federal Register, and organizations may choose to apply the regulations to taxable years ending after December 31, 2019. The application period of the guidance is intended to be favorable to all taxpayers affected by COVID-19, including fiscal year organizations and seasonal businesses.
Warren Averett will continue to monitor and provide updates on these and other important provisions. If you have any questions about how this will affect your organization, please contact your Warren Averett advisor or complete this form to have a member of our team reach out to you.