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IRS Issues Revenue Ruling on Employee Mass Transit Benefits

IRS Issues Revenue Ruling on Employee Mass Transit Benefits

Companies that Provide Mass Transit Passes as Fringe Benefits to Employees

The Internal Revenue Service has issued a new revenue ruling, 2014-32, on companies that provide mass transit passes as fringe benefits to employees. The ruling covers eight specific situations, and updates previous guidance on this topic.

  • Situation 1. The value of the transit pass benefits provided by A to its employees through the smartcards is excluded from gross income under § 132(a)(5) and from wages for employment tax purposes.
  • Situation 2. The value of the transit pass benefits provided by B to its employees through the terminal-restricted debit cards is excluded from gross income under § 132(a)(5) and from wages for employment tax purposes.
  • Situation 3. The value of the transit pass benefits provided by C to its employees through the MCC-restricted debit cards is excluded from gross income under § 132(a)(5) and from wages for employment tax purposes.
  • Situation 4. The value of the transit benefits provided by D to its employees through the MCC-restricted debit cards is not excluded from gross income under § 132(a)(5) and is wages for employment tax purposes.
  • Situation 5. The value of the transit pass benefits provided by E to its employees through the MCC-restricted debit cards is excluded from gross income under § 132(a)(5) and from wages for employment tax purposes.
  • Situation 6. The delivery charges incurred by employees in acquiring the van pool vouchers constitute qualified transportation fringe benefits under § 132(f).
  • Situation 7. The value of the transit benefits provided by F to its employees through the debit cards is not excluded from gross income under § 132(a)(5) and is wages for employment tax purposes. The value of the transit pass benefits provided by G to its employees through funds loaded directly onto the Z smartcard account that can only be used for transit is excluded from gross income under § 132(a)(5) and from wages for employment tax purposes.
  • Situation 8. Beginning after December 31, 2015, the value of the transit benefits provided by H to its employees through a cash reimbursement arrangement is not excluded from gross income under § 132(a)(5) and is wages for employment tax purposes. Under the authority of § 7805(b)(8), the holding with respect to Situation 8 is effective after December 31, 2015. After that date, employers may no longer provide 22 qualified transportation fringe benefits under a bona fide cash reimbursement arrangement in cases in which a terminal-restricted debit card is the only voucher or similar item available for direct distribution by the employer to employees that may be exchanged for a transit pass.

 

 

Source: Internal Revenue Service at http://www.irs.gov/pub/irs-drop/rr-14-32.pdf

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