Publication 15-B Employer'S Tax Guide To Fringe Benefits

if it has so little value (taking into account how frequently

commuter highway vehicles, or carpools. It does not in-

you provide transportation to your employees) that ac-

clude parking at or near your employee’s home.

counting for it would be unreasonable or administratively

Employee. For this exclusion, treat the following individu-

impracticable. For example, it applies to occasional trans-

als as employees.

portation fare that you give to an employee because the

•

employee is working overtime if the benefit is reasonable

A current employee.

and is not based on hours worked.

•

A leased employee who has provided services to

you on a substantially full-time basis for at least a

Employee. For this exclusion, treat any recipient of a de

year if the services are performed under your pri-

minimis transportation benefit as an employee.

mary direction or control.

Qualified Transportation Benefits

Exception for S corporation shareholders. Do not

treat a 2% shareholder of an S corporation as an employee

This exclusion applies to the following benefits.

of the corporation. A 2% shareholder is someone who

•

directly or indirectly owns (at any time during the year)

A ride in a commuter highway vehicle between the

more than 2% of the corporation’s stock or stock with

employee’s home and work place.

more than 2% of the voting power.

•

A transit pass.

•

Relation to other fringe benefits. You cannot exclude a

Qualified parking.

qualified transportation benefit that you provide to an em-

The exclusion applies whether you provide only one or a

ployee under the de minimis or working condition benefit

combination of these benefits to your employees.

rules. However, if you provide a local transportation benefit

other than by transit pass or commuter highway vehicle, or

Qualified transportation benefits can be provided directly

to a person other than an employee, you may be able to

by you or through a bona fide reimbursement arrange-

exclude all or part of the benefit under other fringe benefit

ment. However, cash reimbursements for transit passes

rules (de minimis, working condition, etc.).

qualify only if a voucher or a similar item that the employee

can exchange only for a transit pass is not readily available

Exclusion from wages. You can generally exclude the

for direct distribution by you to your employee. A voucher is

value of transportation benefits that you provide to an

readily available for direct distribution only if an employee

employee during 2003 from the employee’s wages up to

can obtain it from a voucher provider that does not impose

the following limits.

fare media charges or other restrictions that effectively

•

$100 per month for combined commuter highway

prevent the employer from obtaining vouchers. See Regu-

vehicle transportation and transit passes.

lations section 1.132-9 for more information.

•

You can exclude qualified transportation fringe benefits

$190 per month for qualified parking.

from an employee’s wages even if you provide them in

place of pay. For information about providing qualified

Benefits more than the limit. If the value of a benefit

transportation fringe benefits under a compensation reduc-

for any month is more than its limit, include in the

t i o n

a g r e e m e n t ,

s e e

R e g u l a t i o n s

s e c t i o n

employee’s wages the amount over the limit minus any

1.132-9(b)(Q-11).

amount the employee paid for the benefit. You cannot

exclude the excess from the employee’s wages as a de

Commuter highway vehicle. A commuter highway vehi-

minimis transportation benefit.

cle is any highway vehicle that seats at least 6 adults (not

including the driver). In addition, you must reasonably

More information. For more information on qualified

expect that at least 80% of the vehicle mileage will be for

transportation benefits, including van pools, and how to

transporting employees between their homes and work

determine the value of parking, see Regulations section

place with employees occupying at least one-half of the

1.132-9.

vehicle’s seats (not including the driver’s).

Tuition Reduction

Transit pass. A transit pass is any pass, token, farecard,

voucher, or similar item entitling a person to ride, free of

An educational organization can exclude the value of a

charge or at a reduced rate, one of the following:

qualified tuition reduction that it provides to an employee

•

from the employee’s wages.

On mass transit.

A tuition reduction for undergraduate education gener-

•

In a vehicle that seats at least 6 adults (not including

ally qualifies for this exclusion if it is for the education of

the driver) if a person in the business of transporting

one of the following individuals.

persons for pay or hire operates it.

1) A current employee.

Mass transit may be publicly or privately operated and

includes bus, rail, or ferry.

2) A former employee who retired or left on disability.

3) A widow or widower of an individual who died while

Qualified parking. Qualified parking is parking that you

an employee.

provide to your employees on or near your business prem-

ises. It includes parking on or near the location from which

4) A widow or widower of a former employee who re-

your employees commute to work using mass transit,

tired or left on disability.

Page 15

Publication 15-B Employer'S Tax Guide To Fringe Benefits - 2003 Page 15

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