March 6, 2018, the IRS released Publication 15-B, Employer's Tax Guide to Fringe Benefits for use in 2018. As a result of changes related to the Tax Cuts and Jobs Act passed late in 2017, the Publication on page 20 outlines the tax treatment of qualified transportation fringe benefits to employees, including those provided through the use of salary reduction program.
- Employees can continue to pay for parking and transit pass benefits on a tax free-basis through a salary reduction program after December 31, 2017.
- The employer may not deduct any qualified transportation benefits, whether provided directly by the employer, through a reimbursement arrangement, or through a salary reduction program incurred or paid after December 31, 2017.
- Section 11047 suspends the exclusion of qualified bicycle commuting reimbursements from your employee's income for any tax year beginning after December 31, 2017, and before January 1, 2026.
The IRS does not specifically address the unrelated business income tax (UBIT) issue for tax-exempt organizations; but, according to the Employer Council on Flexible Compensation (ECFC) “the Publication makes it clear that amounts reduced from salary for transportation benefits pursuant to a salary reduction program are considered qualified transportation fringe benefits, it appears likely that the IRS would take the position that the salary reduction amounts for parking and transit passes would be qualified transportation fringe benefits subject to UBIT.”
Other changes relative to tax reform include:
- Section 11048 the suspension of qualified moving expense deduction 1-1-18 to 1-1-2026
- Section 13304 limits the deduction by employers of expenses for certain fringe benefits.
- Section 13310 defines items that aren't tangible personal property for purposes of employee achievement awards. Tangible personal property doesn’t include cash, gift cards, and other nontangible personal property.
- Section 13603 added new section 83(i) to the Internal Revenue Code. Under section 83(i), qualified employees who are granted stock options or restricted stock units (RSUs) and who later receive stock upon exercise of the option or upon settlement of the RSU may elect to defer the recognition of income for up to 5 years if certain requirements are met.
- P.L. 115‐97 lowered the federal income tax withholding rates on supplemental wages
Other updates for 2018 include:
- Updated information on Qualified small employer health reimbursement arrangements (QSEHRA)
- Updated business mileage for 2018 is 54.5 cents per mile
- Updated parking and transit benefit amounts of $260 per month for 2018
- Updated health flexible spending arrangement limit of $2,650 per plan year for plan years beginning on or after 12/31/17