Certain Exempt Organizations Granted Waiver from Estimated Tax Penalties Arising from Parking Lot Tax

Additional relief, in the form of a waiver of penalties on underpayment of estimated taxes due on Form 990-T, has been given to certain tax-exempt organizations for 2018 in Notice 2018-100.  The guidance was issued on the same day as Notice 2018-99 which provided guidance on computing the amount of employee parking benefit that is to be treated as UBTI by the exempt organization.

The IRS begins by noting that this new tax provision, found in IRC §512(a)(7) as enacted in the Tax Cuts and Jobs Act, may cause some organizations to pay tax on a Form 990-T for the first time:

Enactment of section 512(a)(7) may result in tax-exempt organizations owing unrelated business income tax and having to pay estimated income tax for the first time. These taxpayers would not be eligible to use the safe harbor in section 6655(d)(1)(B)(ii) to calculate the required annual payment of estimated income tax on the basis of the tax shown on the return for the taxpayer's preceding taxable year and may need additional time to develop the knowledge and processes to comply with estimated income tax payment requirements.

Because of this, the IRS will grant a waiver from the penalty found in IRC §6665 for not paying an adequate amount of estimated income taxes for certain organizations.  Qualifying organizations are described by the IRS as follows:

This relief is available only to any tax-exempt organization that was not required to file a Form 990-T for the taxable year immediately preceding the organization's first taxable year ending after December 31, 2017. This relief is limited to tax-exempt organizations that timely file Form 990-T and timely pay the amount reported for the taxable year for which relief is granted. Taxpayers who do not qualify for relief under this notice may avoid an addition to tax for underpayment of estimated income tax if they meet one of the statutory safe harbor or exception provisions under section 6654 or section 6655 of the Code.

Organizations claiming this waiver must write “Notice 2018-100” on the top of the Form 990-T.