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July
24, 2000
Arlington Heights, Illinois
For Immediate Release
In
1998, the Internal Revenue Service ruled that employees could pay
for certain costs related to commuting to and from work through
pre-tax payroll deductions. This
arrangement is called a Transportation Benefit Program and works
similarly to Flexible Spending Accounts.
Early this year, the IRS released additional
guidance regarding Transportation Benefit Programs.
These guidelines covered a number of different areas, most
notably the method of payment to employees.
The IRS determined that employees must be reimbursed for
public transportation in the form of transit vouchers if these
vouchers are readily available. The
phrase “readily available” seems to be defined as being able to
obtain travel vouchers without significant administrative cost or
effort. This ruling is
meant to prevent employees from receiving pre-tax benefits that
cannot be directly linked to bona fide reimbursements of qualified
transportation benefits. Transit
vouchers can only be redeemed for transportation passes or fare
cards. They cannot be
redeemed for cash. Transit
passes are readily available in most major metropolitan areas.
In
areas where transit vouchers are available, the IRS ruling seems to
require that they be used for a Transportation Benefit Program as
opposed to a cash reimbursement procedure.
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