Administering qualified transportation fringe benefits (QTFBs) will be more complicated in 2012. Congress has allowed the parity between mass transit and parking thresholds — which gave transit and vanpool users the same tax advantage as drivers — to expire.
Starting Jan. 1, 2012, the excludible amount for those who purchase bus, rail and other mass transit passes under their employer-sponsored QTFB program will fall from $230 per month to $125 per month, the IRS said in Revenue Procedure (Rev. Proc.) 2011-52, released Oct. 20. The monthly fringe benefit exclusion under Code Section 132(f)(2)(B) for qualified parking will be $240, up from $230 during 2011.
How We Got Here
In 2009, Congress — recognizing a wide disparity in the tax breaks afforded commuters who took trains and busses, or vanpools, to work versus those who drove and parked their cars at work — made transit and vanpool exclusions equal to those for qualified parking for commuters, but only temporarily. At the time of the legislative change, which came under the American Recovery and Reinvestment Act (ARRA) of 2009, the monthly limit for the former was $120 while the parking exclusion was a relatively generous $230 per month. The ARRA, signed into law Feb. 17, 2009, fixed that disparity, allowing the transit and vanpool exclusion to rise to $230, equal to the break for qualified parking.
The idea was that Congress might act to make the change permanent before the parity expired. Instead, Congress kicked the can a little further down the road in 2010, by enacting the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, which allowed parking and transit benefits to be on a par with each other — still at $230 per month — until the end of 2011.
Congress has not acted to extend that parity, however. So it will expire as of Jan. 1, 2012, when the new IRS-issued limits take effect. For answers to all your tax questions on fringe benefits, see the Employer’s Guide to Fringe Benefit Rules, from Thompson Publishing.