On December 19, 2014. President Obama signed the Tax Increase Prevention Act of 2014 (the “Act). The Act included changes to mass transit benefits. The monthly maximum for mass transit benefits provided to an employee has been $130 per month, while the parking fringe benefit has been $250. The Act has equalized the two benefits retroactively to January 1, 2014 by increasing the mass transit benefit to $250.00. Transit commuters who run all their commuting costs through their employer’s transit plan should get a retroactive true up-a potential $576 extra tax savings for 2014.
Employers may have to correct the taxable fringe benefits for employees who used post-tax dollars to pay for any mass transit benefits that were provided above the $130 monthly maximum. As this change is retroactive to January 1, 2014, payroll amendments may be in order.
Last time, Congress gave a two-year extension that came early enough to allow plans to administer increased employee elections for most of the second year. This extension offers no second year, and little or no opportunity to have an effect on 2014 transit benefits, except for employers who anticipated the extension and provided transit benefits in excess of the pre-Act limit (whether through employee compensation reductions or out of employer funds). The Act offers those employers no transition rules, but the IRS provided transition guidance following the last retroactive extension of transit parity and perhaps will offer similar advice soon.
For a copy of the Tax Increase Prevention Act of 2014, please click on the link below: