Transit Benefit Made Equal to Parking Benefit Permanently
The House of Representatives has filed two pieces of legislation that have bipartisan support in the House and Senate to make the monthly pre-tax dollar amount for Transit Benefits in a Code Section 132 Transportation Plan equal to the monthly pre-tax amount for Parking Benefits. Through the legislation, the parity in the dollar amount for the two benefits would be made permanent. It is expected that the legislation will be enacted before Congress adjourns on December 22, 2015.
For several years, Congress passed legislation on an annual basis that created parity. However, last year, action was not taken and there was disparity during 2015, with the monthly Parking Benefit being a pre-tax amount of $250 compared to the pre-tax monthly amount of $130 for Transit.
Earlier this fall, the IRS announced that the pre-tax monthly Parking Benefit would increase to $255, effective January 1, 2016. However, there was no change made to the $130 monthly pre-tax Transit Benefit.
Under the Protecting Americans from Tax Hikes (PATH) Act and the Consolidated Appropriations Act of 2016, the monthly pre-tax Transit and Parking Benefits would be permanently equal; $255 for each in 2016.
At issue is that many Transportation Plans require employees to make their Transit and/or Parking election well in advance of the month the dollars will be used in. For example, the employer’s Transportation Plan required the election for the Transit and/or Parking Benefit for January 2016 to be made by December 10, 2015. Funding of vouchers, passes and debit cards is already taking place with no way to make a revised January 2016 election.
The IRS will likely address the issue of elections made prior to the parity announcement in future guidance. Employers that offer Transportation Plans to their employees and the brokers that work with these clients will want to make sure that elections for 2016 allow for the parity and watch for the IRS guidance and allowed options for dealing with the January 2016 elections.