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

http://kff.org/health-reform/poll-finding/kaiser-health-tracking-poll-n