Employer-provided transportation benefits.

• Author: Dunn, Bill

IRS Notice 94-3 provides guidance for thc 1993 filing season on the treatment of employer-provided transportation benefits, primarily to take into account an amcndment to Sec. 132(f) by the Energy Policy Act of 1992.

The three significant changes to tax-free transportation benefits are:

* A limitation on employer-provided parking, excludible from gross income to a maximum of $155 per month.

* An increase in the exclusion for transit passes from $21 to $60 per month.

* The addition of an exclusion for van pools, for up to $60 per month.

Any amounts over the new monthly thresholds are taxable. For income and employment tax purposes, employers are responsible for determining the taxable amount to be included in the employees, wages. Sec. 132(f) applies to benefits provided after Dec. 31, 1992.

Free or discounted parking may continue to be provided on a dis criminatory basis. However, if the value of parking provided by the employer exceeds $155 a month the excess value must be includec in the employee's wages. This would occur when the employe pays a third-party provider owns or leases property where parking is provided to employees without the employer incurring an additional cost.

Valuation is the key issue in determining whether thc new $155 monthly threshold has been met; the employer's cost in providing the benefit is irrelcvant (e.g., if the employer's lease includes "free parking," that "cost" may not be used for valuation purposes). Until Mar. 31, 1994, employers providing parking, van pooling and mass transit passes are permitted to use any reasonable method for determining the value of these benefits. After Mar. 31, 1994, these benefits...