The U.S. Treasury Department and Internal Revenue Service (IRS) have issued final regulations regarding the deduction for qualified transportation fringe (QTF) expenses. The regulations became effective upon publication and replaced proposed regulations and interim guidance provided in IRS Notice 2018-99.
Key issues addressed by the final regulations include:
- If an employer pays a third party for its employees’ QTFs, the amount disallowed is the taxpayer’s total annual cost paid to the third party;
- A general rule and three simplified methodologies to determine the amount of nondeductible parking expenses when a parking facility is owned or leased by the employer;
- The deduction disallowance for providing employees transportation in a commuter highway vehicle and transit pass QTFs; and
- Exceptions to the QTF deduction disallowance.
The Tax Cuts and Jobs Act (TCJA), which was passed in 2017, generally disallows employer deductions for QTF expenses provided to their employees and for expenses incurred providing transportation for commuting — except as necessary for employee safety.
QTF benefits are defined as transportation in a commuter highway vehicle between home and work, any transit pass, qualified parking, and any qualified bicycle commuting reimbursement (suspended by the TCJA, effective December 31, 2017 to January 1, 2026).
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Should you have any questions, please don’t hesitate to reach out to your Creative Benefits Team at 866-306-0200.