One of the least anticipated provisions of the newly enacted “Tax Cuts and Jobs Act” is that employers will no longer be able to deduct parking expenses (on the employer’s premises) for employee provided parking.  This seems odd in light of the fact that employees almost always assume that some type of free parking will be provided to them while they are working at the employer’s location.  Most employers wouldn’t want to be in the position of telling their employees they will now have to pay for their own parking.  Accordingly, business owners currently expensing monthly parking (not included as part of rent) for employees will lose the deduction in 2018.  Some analysts have suggested renegotiating rent to include employee parking, although the IRS may view an imputed cost. Prior to January 1, 2018, employer provided parking was considered by the IRS as a ‘Qualified Transportation Benefit’ which also included riding in commuter highway vehicles; transit passes; and qualified bicycle commuting reimbursements.  This meant that employers could take a deduction for such expenses incurred to provide these benefits while still being able to exclude these from the employee’s gross wages.  The general message here (with the exception of the qualified parking) was that the government was incentivizing employees to get out of their cars and find alternative means to driving their own vehicles to work. While the new tax law eliminates these deductions for the employer, it doesn’t change the employee’s exclusion of the benefit from income under IRC Sec. 132, except in the case of qualified bicycle commuting reimbursements.  This sets the stage for an odd situation: Employers can no longer deduct the expense of parking, yet such a benefit is still considered non-taxable for the employee. The current challenge for those employers who wish to avoid the loss of the tax deduction will be to create a method to continue providing tax-deductible parking to employees.  One suggestion is to create “Qualified Transportation Compensation Reduction Plan”, as a workaround of the new law.  Here’s how the plan would work: First, employees would need to pay for their own parking by somehow directly contracting with property management.  This would require the burdensome need to establish parking contracts between each employee and the parking lot/garage owners.  The employer would then increase each employee’s wages by the amount of the parking expense.  By electing to participate in the plan, the employer would forward the cost of the parking directly to the parking provider.  Because IRC Sec. 132 still excludes parking from taxable employee compensation (as noted above) this amount could still be deducted, pretax, from the employee’s wages.  Since the employer still gets a deduction for employee wages, its expenses are fully deductible.  Still, the parking cost must be separately paid from the employer’s other property lease charges.  Such a change might be difficult in the case of multi-term leases which include parking.  Additionally, the landlord won’t be happy about the potential time and expenses incurred to change their current leases. We will have to see if any additional guidance is provided by the IRS, but the implications seem pretty clear.  What was once considered a necessary employee business expense has terminated. Evan Sandler, CPA, MST Tax Manager, Onisko & Scholz