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What Happens If Tax Reform Scuttles Employers' Deduction for Commuting Benefits?

Employees like receiving subsidies from their employers to defray commuting and parking costs, but tax reform—if enacted—could drastically transform these common benefits.

Both tax reform bills passed by the House and Senate—now being reconciled by a joint congressional committee—would eliminate the business deduction for qualified mass transit and parking benefits. Since this provision is in both bills, it is expected to make its way into the final measure that both the House and Senate must pass before President Donald Trump can sign it into law.

Nonprofit employers aren't spared: Tax-exempt employers would be subject to the tax on unrelated business income for any qualified transportation benefits provided to employees.

These benefits, however, would continue to be tax-exempt to employees, who could pay their own mass transit or workplace parking costs through an employer-sponsored program, using pretax income.

The Senate bill also eliminates the tax exclusion on costs related to biking to work, while the House bill does not.

One-third of recently polled employers (32.9 percent) offer incentives to employees who use mass transportation, carpool, bike or walk to work, according to the Brookfield, Wis.-based International Foundation of Employee Benefit Plans (IFEBP), an association of benefit plan sponsors.

Among employers that offer mass transportation incentives, 56.8 percent have a pretax benefit program in place, enabling their workers to exclude mass transit or carpool costs from their gross taxable income.

In December, the IFEBP published Transportation Benefits and Incentives: 2017 Survey Results, based on a poll conducted in November, with responses from... [continue reading]

Article credited to - December 12, 2017 - Stephen Miller, CEBS

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