An end of year tax deal has been signed into law and includes a provision that makes permanent transit benefit parity . The monthly cap on transit, vanpool, and parking will increase to $255/month starting January 1st, 2016. This would mark a major victory for ACT as parity is an issue that ACT and its partners have been working on for nearly two decades.
The legislation also retroactively sets that transit/vanpool cap at $250/month for 2015.
The legislative text of the bill amends section 132(f) of the IRS code and actually sets the cap at $175/month, the same as parking. However, the code is based of 1999 dollars and is subject to a cost of living adjustments for the past fifteen years. Said in different terms, the $175 in 1999 dollars equals $255 in 2016 dollars. The IRS will likely send a revised notice which will detail the increase. However, those who administer the transit benefit should be offering the full $255/month for 2016.
A bit about retroactive benefits…….
The legislative text once again includes retroactive benefits. What does this mean? If you (as an employer) allowed employees to withhold above the cap and purchased fare media for them with taxable dollars, you will be able to retroactively apply the $250/month cap for 2015. Again, this only applies to those employees and employers who withheld above the cap. If employees used their own money to buy fare media the new cap does not apply (even if they have receipts or other proof of purchase).
For reference, below is a link to the 2013 guidance related to retroactive transit benefits. We expect the IRS to issue similiar guidance early next year, but for now interested parties should consider this guidance in making appropriate adjustments: