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In 1972, the church opened its new Church Office Building at 50 East North Temple Street. The 28-story building, built by Christiansen and Clyde Construction Company for $31.3 million, allowed scattered church employees to all work under one roof. Initially, about 1,500 employees, who had been at 16 different locations, moved into the building. It was originally slated to provide office space to over 2,000 employees. And so that those employees could make it, the Church Office Building had 1,250-spot underground parking garage.

And the existence of that 1,250-spot underground parking garage means that the church owes federal income taxes for 2018.

Because yes, the church owes taxes for last year. And, perhaps to church members’ surprise, those taxes aren’t the result of secular liberals who hate Mormons/religion/God. Those taxes are the result of the Tax Cuts and Jobs Act, the GOP’s late-2017 tax reform that was both conceived of and passed without any input or votes from Democrats.

To be fair, the taxes that the church will pay weren’t aimed at the Mormon church, or at churches in general. They were revenue-raising provisions aimed at tax-exempt organizations generally. But churches—including ours—are tax-exempt organizations, and these revenue-raising provision caught churches in their net.

There were several changes made to the tax laws governing tax-exempt organizations. For these purposes, I’m only interested in one, though: changes to the tax treatment of certain qualified transportation fringe benefits.

And what is a qualified transportation fringe benefit? For our purposes, it basically means employer-provided parking and employer-provided transit passes. Employees don’t have to include the value of parking or transit passes in their gross income (up to a ceiling amount), and therefore don’t have to pay taxes on those amounts.

Until 2018, while employees didn’t have to include the value of those things in their gross income, employers could nonetheless deduct the cost of providing parking or transit passes. That changed with the TCJA, though: while employers can still provide transportation benefits to their employees, and the employees still don’t have to include the value of those benefits in gross income, employers can no longer deduct the cost of providing the benefits.

Note that this change would be irrelevant for tax-exempt organizations. Because they don’t pay taxes, they also don’t take deductions. But, in its zeal to raise additional revenue, Congressional Republicans decided to remedy that, and added section 512(a)(7) to the Code.

Section 512 generally talks about unrelated business taxable income (UBTI). In short, when a tax-exempt organization does business-y stuff that doesn’t advance its charitable purpose, it pays taxes on that endeavor as if it were a for-profit organization. The UBTI rules were largely in reaction to the NYU School of Law. It acquired (I believe by donation) ownership of the Mueller Macaroni Company; as a wholly-owned part of a tax-exempt organization, its profits were exempt from tax. Other pasta makers worried that, if Mueller didn’t pay taxes, that it could undercut their prices or it could use its profits to expand, either way competing unfairly with for-profit companies. So Congress created the UBTI rules to tax that kind of unrelated business.

In December of 2017, it made an expansion of those rules: now a tax-exempt organization that provides qualified transportation fringe benefits to employees must include the value of the fringe benefits it provides as UBTI and pay taxes at ordinary corporate rates on those amounts. (Note how weird this is—this isn’t income that tax-exempt organizations are paying taxes on: it’s expenses.)

What does that mean for the church? Presumably it incurs some expense in maintaining the parking structure. According to the IRS, those expenses include, among other things, repairs, maintenance, utilities, insurance, cleaning, and parking lot attendants. The church has to include those costs as UBTI.

If it provides employees with transit passes, it also must include the cost of those transit passes in its UBTI. (Right now, it looks like a monthly local pass for an adult goes for $83.75. If that’s what it provides, it has $83.75 of income it includes for each employee.)

The church then takes the sum of those UBTI amounts and multiplies them by 21% (the current corporate tax rate). Now frankly, I have no idea what the costs of maintaining a parking garage are. But leaving that aside, there are 1,250 spots for 2,000 employees. Let’s pretend that the rest of the employees get a transit pass.[fn1]

750 employees times $83.75 = $62,812.50. So on those transit passes, the church would have to include almost $63,000 of income per month. At a 21% tax rate, that’s $13,190.63 a month, or $158287.50 a year in taxes that it owes. (And remember, that doesn’t include the cost of maintaining the parking garage, or of provide parking to other employees who park at different locations.)

How much will the church ultimately pay on qualified transportation fringes? I don’t know, and will likely never know. But I do know that it will be lots more than it paid when it started using the Church Office Building in 1973 and than it paid while using it in 2017.

[fn1] Yes, I get that that’s a terrible assumption. Likely some employees live within walking distance, some carpool, and some park elsewhere. But I can’t do illustrative math if I don’t make some assumptions.