Notice 2018-99 provides that if a taxpayer owns or leases all or a portion of

one or more parking facilities where its employees park, the section 274(a)(4) disallowance may be calculated using any reasonable method and provides a fourstep methodology that is deemed to be a reasonable method. However, using the value of employee parking to determine expenses allocable to employee parking in a parking facility owned or leased by the taxpayer is not a reasonable method because section 274(a)(4) disallows a deduction for the expense of providing a QTF, regardless of its value. Furthermore, for taxable years beginning on or after January 1, 2019, a method under Notice 2018-99 that fails to allocate expenses to reserved employee spaces cannot be a reasonable method.

For purposes of Notice 2018-99, a “parking facility” includes indoor and outdoor garages and other structures, as well as parking lots and other areas, where employees may park on or near the business premises of the employer or on or near a location from which the employee commutes to work. The term does not include any parking on or near property used by the employee for residential purposes. If a taxpayer owns or leases more than one parking facility in a single geographic location, the taxpayer may aggregate the number of spaces in those parking facilities. However, if a taxpayer owns or leases parking facilities in more than one geographic location, the taxpayer may not aggregate the spaces in parking facilities that are in different geographic locations.

Also for purposes of Notice 2018-99, “total parking expenses” include, but are not limited to, repairs, maintenance, utility costs, insurance, property taxes, interest, snow and ice removal, leaf removal, trash removal, cleaning, landscape costs, parking lot attendant expenses, security, and rent or lease payments or a portion of a rent or lease payment (if not broken out separately). A deduction for an

allowance for depreciation on a parking structure owned by a taxpayer and used for parking by the taxpayer’s employees is an allowance for the exhaustion, wear and tear, and obsolescence of property, and not a parking expense for purposes of Notice 2018-99. Compare section 274(a) (1) (disallowing deductions for any “item” with respect to entertainment activities or facilities) with section 274(a)(4) (disallowing deductions for the “expense” of any QTF). See also W.L. Schautz v. United States, 567 F.2d 373, 376 (Ct. Cl. 1977) (noting that section 274(a)(1) applies to deductions broadly, not to expenses), and Gordon v. Commissioner, 37 T.C. 986, 987 (1962) (“Any allowance for depreciation is not an ‘expense paid’ or ‘amount paid.’”). Expenses paid or incurred for items not located on or in the parking facility, including items related to property next to the parking facility, such as landscaping or lighting, also are not included.

The term “employee”, as used in Notice 2018-99, is defined in §§1.132-1(b) (2)(i) and 1.132-9(b), Q/A-5, as any individual who is currently employed by the employer; the term includes common law employees and other statutory employees, such as officers of corporations. Section 1.132-9(b), Q/A-24, explains that partners, 2-percent shareholders of S corporations, sole proprietors, and independent contractors are not employees for purposes of section 132(f).