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New York State Accounting System User Procedures Manual

Volume Name
CONTROLS AND SPECIAL PROCEDURES
Volume
XI
Date
12/29/06
Section Name
Employer-Provided Transportation Benefits
Section
8.0160

     The purpose of this section is to advise State agencies of Federal tax law concerning employer-provided transportation benefits.

QUALIFIED TRANSPORTATION FRINGE BENEFITS

     Benefits categorized as ‘Qualified Transportation Fringe Benefits’ are excludable from gross income.

1. Qualified transportation fringe benefits are applied on a monthly basis. If the value of the benefit does not exceed the statutory limit in any month, the unused portion of the exclusion may not be carried over to subsequent months.

2. Employers that make cash reimbursements to employees must ensure that their employees have, in fact, incurred expenses for parking, transit passes or transportation in a commuter highway vehicle.

Employer-Provided Parking

1. The value of parking provided to an employee excludable from income (the Federal statutory rate) is determined annually. The 2007 rate is $215 per month. A ‘G’ Bulletins is issued annually providing the applicable Federal statutory rate for theyear.

2. The Federal statutory rate cap applies, and amounts in excess of the cap must be included in wages, when an employer provides parking on its own property, pays someone else to furnish employee parking, or reimburses employees for the cost of parking in a garage or lot (including a park-and-ride lot).

3. Employer-provided parking at or near the employee’s residence is fully includable as income. The rate cap does not apply.

4. The following are IRS rules for determining the value of parking:

A. For employer-provided parking, the amount includable in wages is the amount by which the monthly value exceeds the sum of the amount excludable (the Federal statutory rate) plus any payments by the employee.

EXAMPLE: Employer P provides qualified parking with a fair market value of $225 per month to its employees, but charges the employees $25 per month. Because the amount paid by the employees ($25) plus the amount excludable for qualified parking ($215 for 2007) equal the fair market value of the benefit, no amount is includable in the employee's gross income.

B. The monthly value of parking provided by an employer to an employee is based on the cost (including taxes and other added fees) that an individual would incur in an arm's-length transaction to obtain parking at the same site. If that cost is not ascertainable, then the value of parking is based on the cost that an individual would incur in an arm's-length transaction for a space in the same lot or a comparable lot in the same general location under the same or similar circumstances.

C. The monthly value of employer-provided parking is based on the right of access, and not on the actual use of the parking by the employee.

EXAMPLE 1: Employer V maintains a parking lot for its employees. V requires its employees to apply for parking spaces prior to the month in which the space is to be used. V distributes a monthly parking pass to each employee who applies to park, and does not allow anyone without a pass to park in its lot. No value is includable in the gross incomes of employees who do not receive parking passes because they do not have access to employer-provided parking. The value of parking provided to employees who receive passes is the full monthly value.

EXAMPLE 2: Employee D has unlimited access to qualified parking provided by Employer M. During one particular month, D used the parking space 5 days, because D was away on business travel for one week and on a personal vacation for two weeks. Because D had access to the parking space for the entire month, the amount includable in D's gross income is the amount by which full monthly fair market value exceeds the Federal statutory rate.

D. The monthly rate for a parking space may be used to determine a monthly value, rather than the daily rate multiplied by the number of days in the month. If an annual rate is available, the monthly rate may be determined by dividing the annual rate by twelve. If a space is available for less than a month, the space may be valued using the daily rate multiplied by the number of days the employee has access to the space. In no case is it necessary, however, for the monthly value to exceed the monthly rate. The rates described above may only be used if they are available to the general public.

Employer-Provided Commuter Highway Vehicle Transportation and Transit Passes

     Up to $110 per month (2007 rate - Review current 'G' bulletins to determine the applicable Federal Statutory rate), is not includable in income if it is for combined commuter highway vehicle transportation and transit passes.

Employer-Provided Transportation Between Residence and Work in a ‘Commuter Highway Vehicle’

     Such transportation is excludable providing it is in a vehicle which meets certain requirements, including the following:

1. Vehicle must seat at least six passengers and a driver.

2. Vehicle is reasonably expected to be used 80% of the time to transport at least three employees at once (plus the driver).

     Otherwise, employer-provided transportation between residence and work is taxable.

REPORTING PROCEDURES

     The portion of transportation fringe benefits which are taxable must be included in the wages of the affected employees.

     Instructions for reporting qualified transportation fringe benefits which exceed statutory limits are issued in Payroll Bulletins.

AGENCY RESPONSIBILITY

     Agencies should periodically review employer-provided transportation benefits to determine whether any employees are affected by these provisions of the Federal Tax Code. If so, notify the Accounting Information Center at (518) 473-1170. OSC will then provide those agencies with further instructions.