Beginning January 1, 2016, for-profit and nonprofit employers with 20 or more full-time non-union employees in New York City must offer these full-time employees the opportunity to use pre-tax income to pay for their commute. Under federal tax law, employees can currently deduct up to $130 a month from pre-tax income to pay for qualified transportation. A full-time employee is an employee who works an average of 30 hours or more per week in the most recent four weeks, any portion of which was in New York City. This includes out of state businesses that have employees working regularly or occasionally in NYC. Under the law, covered employers must offer commuter benefits to existing full-time employees beginning January 1, 2016 or within four weeks after an employee begins full-time work, whichever is later.
The law gives employers a six-month grace period—from January 1 to July 1—to begin offering a commuter benefits program. Employers will not be subject to penalties for violations that take place before July 1. The law also gives employers 90 days to cure (correct) a violation before DCA is authorized to seek penalties.
Employees of the federal government, employees of New York State, and New York City governments, including any office, department, independent agency, authority, institution, association, society, or other body of the state, including the legislature and the judiciary are not required to be offered these benefits. In addition, employers not required to pay federal, state, and City payroll taxes are not required to offer these benefits. Also exempt are employees covered by a collective bargaining agreement.
Employers must keep records that demonstrate that each eligible full-time employee was offered the opportunity to use pre-tax income to purchase transit benefits and whether the employee accepted or declined the offer. Employers must keep records for two years. Employers may use the model form available on the DCA website nyc.gov/commuterbenefits to document compliance for recordkeeping purposes.
Transit that is covered by the law includes NYC regional mass transit services, including MTA subway and bus, LIRR, Amtrak, New Jersey Transit, and Metro-North, eligible ferry and water taxi services, eligible vanpool services, eligible commuter bus services, and Access-A-Ride. Transit that is not covered by the law includes parking expenses and bicycling expenses, including CitiBikes. Under federal tax law, employees cannot use pre-tax income for the qualified bicycle commuting reimbursement benefit, and bicycle rental fees are not qualified transportation fringe benefits.
To ensure compliance with U.S. Treasury rules, unless expressly stated otherwise, any U.S. tax advice contained in this communication is not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.