IRS letter ruling - UBTI implications of parking and other tenant services 

June 12:  The IRS issued a private letter ruling (PLR)* that addresses, among other issues, whether rental income derived from parking constitutes unrelated business taxable income (UBTI).

Read PLR 201422027 [PDF 525 KB] released March 30, 2014, and dated March 6, 2014.

*Private letter rulings are taxpayer-specific rulings furnished by the IRS National Office in response to requests made by taxpayers and can only be relied upon by the taxpayer to whom issued. It is important to note that, pursuant to section 6110(k)(3), such items cannot be used or cited as precedent. Nonetheless, such rulings can provide useful information about how the IRS may view certain issues.


A private foundation received, by gift, a rental apartment complex.

As required by city ordinance, the apartment complex provides off-street parking to all of its residents. The majority of the parking is provided in designated carport parking spaces for which a minimal additional charge is added to the monthly apartment rent. The remaining tenants are provided with surface parking at no additional cost.

Tenants cannot “opt out” of their parking spaces or lease them to non-residents, and no parking is made available to the general public. No services, such as a security guard, are provided.

Letter ruling

The IRS ruled that the parking spaces are “incidental to occupancy” and that any incidental payment for parking is excluded from UBTI as rents from real property under section 512(b)(3) of the Internal Revenue Code.

KPMG observation

A reading of other authorities—particularly Rev. Rul. 2004-24—might suggest that the IRS’s position in this situation would be that income attributable to parking is includible in UBTI. However, in at least two subsequent PLRs, including the one discussed above, the IRS has ruled that revenues attributable to parking are not includible in UBTI. Neither PLR cites the revenue ruling.

Read a more in-depth discussion of the UBTI consequences of parking in a November 2010 report [PDF 114 KB] prepared by KPMG LLP: What’s News in Tax: Can I Park Here? The Tax Court Weighs in on the UBTI Controversy

For more information, contact:

Rick Speizman, Partner-in-Charge of KPMG's Washington National Tax Exempt Organizations Tax group

+1 (202) 533-3084

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