Proposed regulations from the U.S. Treasury Department and IRS appear in today’s edition of the Federal Register and provide additional guidance for implementing section 274 amendments enacted under the 2017 tax law (Pub. L. No. 115-97), the law that is often referred to as the “Tax Cut and Jobs Act” (TCJA), and that disallows a deduction for the expense of any section 132(f) qualified transportation fringe (QTF) benefits, including qualified parking, provided to an employee, effective for amounts paid or incurred after December 31, 2017.
Prop. Reg. section 1.274-13 generally follows Notice 2018-99, but provides several new simplified methodologies for determining the loss of deduction for qualified parking. This report provides initial impressions about the proposed regulations.
The preamble to the proposed regulations provides that while the value of a QTF is relevant for determining the exclusion from employee income under section 132(f) and the exception under section 274(e)(2), the disallowance only relates to expenses paid or incurred in providing the QTF and not its value. The proposed regulations provide that the exception for expenses included in employee compensation under section 274(e)(2) does not apply to a qualified transportation fringe with a zero value.
Read the proposed regulations [PDF 351 KB]
The proposed regulation provides that a taxpayer who owns or leases a parking lot can calculate the disallowance using either the general method or one of three new “simplified methodologies.” The taxpayer can choose to apply the methodology for each tax year and each parking facility.
The general rule allows the taxpayer to use any reasonable interpretation of section 274(a)(4) within certain parameters:
The proposed regulation provide three methodologies a taxpayer can use if they do not use the general rule.
The Treasury and IRS request comment on all aspects of the proposed regulations, with a few specific requests:
The regulations are proposed to apply for tax year beginning on or after the date the final regulations are published in the Federal Register. In the interim, taxpayers may rely on the proposed regulations or the guidance provided in Notice 2018-99 for treatment under section 274(a)(4) of QTF, transportation, and commuting expenses (as applicable) paid or incurred in tax years beginning after December 31, 2017.
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Erinn Madden | +1 (202) 533-3757 | firstname.lastname@example.org
Terri Stecher | +1 (202) 533-4830 | email@example.com
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