The Parking Minute

A minute of parking news and commentary

Taxes

Developers should pay more to build parking

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Mexico City charges fees for excess parking supply and your city should too.

More car parking in our cities is an invitation for more cars and the congestion, pollution, and sprawl that those cars bring with them are a cost borne by everyone (whether they drive or not), particularly the poor and disenfranchised.

Each of these stalls is a threat to our environment.

Despite this reality, airport operators, development agencies, and many developers want to build large amounts of new structured parking, in the face of climate, housing, and traffic emergencies.

Reforms to parking requirements are becoming more common, but too often these reforms are structured as if building less parking is a bad thing for the neighborhood or city center. Developers who build little-to-no parking are required to provide bus passes, permanently affordable housing, additional street trees, or other supposed mitigations. Those are all critical things to provide, but not building parking, alone, makes housing cheaper and more abundant, fights climate change, and discourages driving to work.

When Mexico City eliminated minimum parking requirements citywide in 2017, they took things one step further and imposed a parking impact fee on developers who build lots of new parking. The city has relatively generous parking maximums (about 3 stalls per housing unit) but if a developer builds more than 1 stall per unit, they have to pay a fee:

  • For 50-75% of the maximum parking allowance, a developer pays approximately $4,000 per stall.
  • For 75-100% of the allowance, the fee is about $8,000 per stall.
  • Residential-only developments are allowed to build above the maximum, for an additional $12,000 per stall fee.

These fees are used to improve public transit in the city, but other good uses would be to fund public affordable housing or plant additional trees at developments where no parking is built.

Parking impact fees would be a smart way to discourage excess parking without restricting the freedom of developers, airports, and agencies that insist on building large amounts.

Should transit benefits be taxed more than parking benefits? Let the IRS know what you think.

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There’s another opportunity to tell the IRS how you feel about parking taxes and transit benefit taxes, comments are due on Friday, June 7.

Buried in the Trump Tax Cuts was an esoteric change to how fringe benefits for commuters are taxed. Prior to the cuts, employers could provide free parking or free transit passes, up to a little more than $250 a month as a non-reported non-taxable fringe benefit. But after the tax cut went into effect, transit and parking benefits would be taxable to the employer at the corporate tax rate, even if the employer was a non-profit hospital, university, or charity. This could lead to many employers ending transit benefits. It might not be so bad if parking was really taxed the same way, but it isn’t.

Some employers, mostly in urban centers, pay third parties for employee parking, those employers would have to pay corporate taxes on the cost of parking, but employers with their own parking, or bundled parking in their suburban office park leases, would pay much less, or nothing, based on IRS guidance issued last year.

Having received many comments, the IRS is now asking the public to weigh in on what tax issues that we think should be their priority to work on this year. 

This could really be a very damaging thing for transportation demand management programs and other efforts to reduce single-occupancy commutes.  The Coalition for Smarter Transportation has a page with more information, read up a little and comment, your bus pass could depend on it.