Handle Parking Lot Fees Properly

Be careful before you charge households for parking spaces at your site. Whether you can charge for parking depends on how the parking area at your site is classified under tax credit rules. If you charge your residents for parking without knowing the rules, the owner may lose tax credits on a portion of the site and possibly prompt the IRS to recapture credits claimed as far back as year one. Here are some basics on when and when not to collect parking fees at your site.

First, it is important to determine the parking lot’s tax credit status. To do this, ask the site owner for a copy of the regulatory agreement with your state agency to see if your parking lot is considered part of the site’s common area or part of its commercial space. At the time of the original agreement, the owner may have specifically set aside part of the site’s common area as a parking lot, which would entitle the owner to claim tax credits on that part of the site. On the other hand, the owner may have requested that the parking lot be included in commercial space for which no tax credits may be claimed.

If your parking lot is part of your site’s common area, you cannot charge a parking fee to any household, even your market-rate households. Improperly charging fees for the use of the parking lot could lead to the denial of tax credits relating to that area. The IRS specifically bars you from charging households a separate fee to use common areas. Common areas must be equally available and provided without charge to all households at the site, including households that are not low income.

If the parking lot is considered part of the commercial area, you may charge households a fee to park there, provided the parking lot is an optional amenity. If the fee is not a condition of occupancy, you may charge a separate fee in the lease, even if it is in addition to the maximum allowable rent. On the other hand, if the fee is not optional, but a condition of occupancy or part of a mandatory building fee, then it will be considered part of the gross rent a household may pay. If the gross rent exceeds the maximum allowable rent, you will put the site at risk of noncompliance.