The Qualified Transportation Fringe Benefit (QTFB) is one of the most effective TDM strategies in use by employers to help shift individuals away from single occupancy vehicles. Commonly referred to as commuter benefits and/or transit benefits, the QTFB allows both employers and employees to receive tax benefits through the pre-tax purchasing of public transit fare media including vanpool fares.
Effective January 1, 2020, the new allowable monthly limit is $270. This can even be combined with the pre-tax parking benefit of $270/month, enabling commuters to receive significant savings on the costs of parking at and using public transit.
The Tax Cuts & Jobs Act of 2017, included some changes to the QTFB – especially to exempt organizations. Within the bill, there is language that effectively provides that the unrelated business taxable income of an exempt organization be increased by the amount of the benefit (pre-tax and subsidy) provided to employees. As a result, non-profits (hospitals, universities, museums, etc.) providing a commuter transportation benefit will be hit hard, as they now will have to pay an unrelated business income tax (UBIT), equal to 21% of the total value of the transportation and parking benefits provided as a subsidy to employees or funded through a pretax payroll deduction. The Bicycle benefit was eliminated by the TCJA.
After two years of advocacy from ACT and other organizations to repeal the inclusion of the Unrelated Business Income Tax on transit benefits provided by exempt organizations, the repeal was included in the 2019 year-end tax extenders package, passed in Congress and was signed by the President late December 2019.
Visit the ACT UBIT page for more information.