TEI Comments on Notice 2018-99, Parking Expenses for Qualified Transportation Fringes Under Section 274(a) (4).

PositionTax Executives Institute

On February 22, 2019, TEI submitted responsive comments and recommendations to the Internal Revenue Service concerning the interim guidance provided for taxpayers in Notice 2018-99. TEI's comments, which are reprinted below, were developed by a cross-industry working group of Tax Reform Task Force and Federal Tax Committee members under the leadership of Katherine C. Castillo and Julia Lagun, Watson M. McLeish, tax counsel for the Institute, coordinated the preparation of TEI's comments.

Tax Executives Institute (TEI) welcomes this opportunity to comment on Notice 2018-99, which was published in the Internal Revenue Bulletin on December 24, 2018 (the "Notice"). (1) The Notice provides interim guidance for taxpayers to determine, inter alia, the amount of parking expenses for qualified transportation fringes that is nondeductible under section 274(a)(4) of the Internal Revenue Code ("Code"). (2) Section 274 was amended by Public Law 115-97, colloquially known as the Tax Cuts and Jobs Act (the "Act"), effective for amounts paid or incurred after December 31, 2017. (3)

TEI commends the Department of the Treasury ("Treasury") and the Internal Revenue Service (the "Service") for releasing interim guidance and inviting stakeholder input on this matter of widespread concern to business taxpayers. The Notice is helpful in clarifying a variety of issues pertaining to the new deduction disallowance in section 274(a) (4), and we are especially pleased with the clarifications concerning deductions for allowances for depreciation and expenses paid for items not located on or in the parking facility. We likewise appreciate the confirmation that expenses for parking made available to the general public fall within the specific exception in section 274(e)(7). There are, however, certain aspects of the Notice that warrant clarifying or other changes to ensure successful implementation of the statute consistent with congressional intent. The following comments and recommendations address those aspects of the Notice that are of greatest mutual concern to TEI members as they work to apply, and comply with, new section 274(a)(4).

About TEI

TEI is the preeminent association of in-house tax professionals worldwide, with over 7,000 members representing 2,800 of the leading companies in North and South America, Europe, and Asia. TEI represents a cross-section of the business community, and is dedicated to the development of sound tax policy, uniform and equitable enforcement of tax laws, and minimization of administration and compliance costs to the mutual benefit of government and taxpayers. As a professional association, TEI is committed to fostering a tax system that works--one that is administrable and with which taxpayers can comply in a cost-efficient manner.

TEI members are responsible for administering the tax affairs of their companies and must contend daily with provisions of the tax law relating to the operation of business enterprises, including the rules governing the deductibility of ordinary and necessary business expenses. We believe that the diversity and professional experience of our members enable TEI to bring a balanced and practical perspective to the issues raised by the Notice, and we are eager to assist Treasury and the Service in their important, collective efforts to implement the Act.


Section 274(a)(4) of the Code, as added by the Act, provides that no deduction will be allowed for the expense of any qualified transportation fringe (as defined in section 132(f)) provided to an employee of the taxpayer. Section 132(f), in turn, defines the term "qualified transportation fringe" to include "qualified parking," which means parking provided to an employee on or near the business premises of the employer or on or near a location from which the employee commutes to work. (4) The Code is silent, however, as to how an employer should determine the amount of qualified parking expense that is nondeductible under section 274(a)(4). That question is the focus of the Service's guidance in the Notice and TEI's comments below.

  1. Qualified Parking Benefits with No, or a De Minimis, Fair Market Value

    Many TEI members work for companies that own or lease parking facilities where they and their fellow employees park. For those taxpayers, until further guidance is issued, the Notice provides that the section 274(a) (4) disallowance may be calculated using any reasonable method. (5) And, to provide those taxpayers with some degree of certainty, the Notice describes a four-step methodology that the Service deems to be a reasonable method. (6) The Notice also states, however, that using the value of employee parking to determine the employer's parking expenses is not a reasonable method. (7) Thus, the Services interim guidance would appear to impact an employer's deduction even in cases where the employer-provided parking has no, or a de minimis, fair market value. TEI believes that this approach would be problematic for a number of reasons and submits the following alternative recommendations.

    a. In General

    The Act's legislative history reveals that, as part of its broader tax reform effort in 2017, the Committee on Ways and Means believed that "certain nontaxable fringe benefits should not be deductible by employers if not includible in income of employees." (8) Alternatively stated, the Committee believed that a tax deduction for such expenses should be permitted only to the extent such items are reported as employee compensation. (9) It follows, therefore, that section 274(e)(2) provides an exception to the qualified transportation fringe expense...

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