December 8, Highlights of This Issue These synopses are intended only as aids to the reader in identifying the subject matter covered. They may not be relied upon as authoritative interpretations.
For purposes of sections , , , , and other sections of the Code, tables set forth the rates for December This revenue ruling also provides guidance on the use by employees of debit cards for paying mandatory shipping fees on transit passes. This revenue procedure is effective for taxable years and plan years beginning after December 31, This notice applies to taxable years beginning after December 31, In addition, the regulations under section B generally require the U.
Under current law, the standard for curing unfiled or deficient GRAs and Forms is the same: In addition, the NPRM proposed to require a Form to be filed in all cases in which a GRA is filed and to generally treat noncompliance with the GRA rules determined without regard to not willful relief as a failure to satisfy a section B reporting obligation.
Further, the NPRM proposed to apply similar rules to other types of section filings. Amendments to the safe harbor explanations reflected in this notice relate to the allocation of pre-tax and after-tax amounts, distributions in the form of in-plan Roth rollovers, and certain other clarifications to the two safe harbor explanations.
The amendments to the safe harbor explanations and attached model notices may be used for plans that apply the guidance in section III of Notice —54, —41 I. Introduction The Internal Revenue Bulletin is the authoritative instrument of the Commissioner of Internal Revenue for announcing official rulings and procedures of the Internal Revenue Service and for publishing Treasury Decisions, Executive Orders, Tax Conventions, legislation, court decisions, and other items of general interest.
It is published weekly. It is the policy of the Service to publish in the Bulletin all substantive rulings necessary to promote a uniform application of the tax laws, including all rulings that supersede, revoke, modify, or amend any of those previously published in the Bulletin. All published rulings apply retroactively unless otherwise indicated. Procedures relating solely to matters of internal management are not published; however, statements of internal practices and procedures that affect the rights and duties of taxpayers are published.
Revenue rulings represent the conclusions of the Service on the application of the law to the pivotal facts stated in the revenue ruling. In those based on positions taken in rulings to taxpayers or technical advice to Service field offices, identifying details and information of a confidential nature are deleted to prevent unwarranted invasions of privacy and to comply with statutory requirements.
Rulings and procedures reported in the Bulletin do not have the force and effect of Treasury Department Regulations, but they may be used as precedents. Unpublished rulings will not be relied on, used, or cited as precedents by Service personnel in the disposition of other cases. In applying published rulings and procedures, the effect of subsequent legislation, regulations, court decisions, rulings, and procedures must be considered, and Service personnel and others concerned are cautioned against reaching the same conclusions in other cases unless the facts and circumstances are substantially the same.
The Bulletin is divided into four parts as follows: This part includes rulings and decisions based on provisions of the Internal Revenue Code of This part is divided into two subparts as follows: To the extent practicable, pertinent cross references to these subjects are contained in the other Parts and Subparts.
This part includes notices of proposed rulemakings, disbarment and suspension lists, and announcements. The last Bulletin for each month includes a cumulative index for the matters published during the preceding months. These monthly indexes are cumulated on a semiannual basis, and are published in the last Bulletin of each semiannual period. Transit system X provides smartcards that may be used by employers in the metropolitan area served by X to provide fare media for transit system X to employees.
Smartcards are cards that contain a memory chip storing certain information that uniquely identifies the card and value stored on the card, and that can be used either as fare media or to purchase fare media. The amount stored on the smartcard provided by transit system X is usable only as fare media; it cannot be used for any other purpose or to purchase anything else.
A uses the smartcards to provide transportation benefits to its employees. A does not require its employees to substantiate their use of the smartcards. Employer B provides to its employees transportation benefits in an amount not exceeding the statutory monthly limit.
Debit card provider P provides terminal-restricted debit cards that may be used by employers to provide transportation benefits to their employees. Terminal-restricted debit cards are debit cards that are restricted for use only at merchant terminals at points of sale at which only fare media for local transit systems is sold.
B uses the terminal-restricted debit cards provided by P to provide transportation benefits to its employees. B does not require its employees to substantiate their use of the debit cards.
Employer C provides to its employees transportation benefits in an amount not exceeding the statutory monthly limit. Debit card provider Q provides debit cards that may be used by employers to provide transportation benefits to their employees. Q restricts the use of the debit cards to merchants that have been assigned a merchant category code MCC indicating that the merchant sells fare media.
The merchant may or may not sell other merchandise. C uses the MCC-restricted debit card provided by Q to provide transportation benefits to its employees. For the first month an employee participates in the transportation benefit program, the employee pays for fare media with after-tax amounts. C then remits to Q an amount equal to the amount of substantiated fare media expenses for the prior month, which Q then electronically allocates to the debit card assigned to the employee.
With respect to expenses for which employees seek reimbursement that were paid using the MCC-restricted debit card, C receives periodic statements providing information on the use of each debit card, which include information on the identity of the merchants at which the debit card was used and the date and amount of the debit card transactions.
In addition, for the first month the debit card was used, prior to providing reimbursement, C requires that the employee certify that the debit card was used only to purchase fare media. For subsequent months, C does not require employee certifications prior to reimbursement of recurring expenses that match the seller and the time period covered for expenses previously substantiated under the procedures described above e.
However, C requires a recertification at least annually from each employee that the debit card was used only to purchase fare media. Employer D provides to its employees transportation benefits in an amount not exceeding the statutory monthly limit. The debit cards have been restricted for use only at merchants that have been assigned an MCC indicating that the merchant sells fare media. D uses the MCC-restricted debit card provided by Q to provide transportation benefits to its employees.
D provides employees with the MCC-restricted debit cards as soon as they begin work. In addition, written on each debit card is the statement that the card is to be used only for fare media, and, by using the card, the employee certifies that the card is being used only to purchase fare media. Employer E provides to its employees transportation benefits in an amount not exceeding the statutory monthly limit.
Debit card provider R provides debit cards that may be used by employers to provide transportation benefits to their employees. The debit card can be used to purchase fare media on several transit systems within the metropolitan area in which E is located.
The debit cards are restricted for use only at merchants that have been assigned an MCC indicating that the merchant sells fare media. These restrictions block all purchases from any merchant in the area with an acceptable MCC that sells any items other than fare media.
These restrictions have been tested and effectively prohibit recipients of the debit cards from using them to purchase any items other than fare media. E does not require its employees to substantiate their use of the debit cards. E requires the employees to use the debit card to purchase their vanpool vouchers.
The vanpool voucher provider does not sell any other merchandise. Vanpool vouchers may be purchased by the employee in-person at certain locations or online. If purchased online, the vanpool voucher provider imposes a reasonable and customary delivery charge. The employee includes the delivery charge as a cost of transit and pays for the delivery charge with the debit card.
The aggregate cost of the vanpool voucher and the related delivery charge does not exceed the statutory monthly limit. Employer F and Employer G provide to their employees transportation benefits in amounts not exceeding the statutory monthly limit.
Z provides a smartcard that may be used by employers to provide transportation benefits to their employees. Funds in each of the three accounts cannot be transferred between accounts. Debit card provider S provides debit cards, which may be used by employers to provide transportation benefits to their employees. Except as provided below, these restrictions block all purchases from any merchant in the area with an acceptable MCC that sells any items other than fare media.
F provides its employees who use Z with the S debit card and employees use the debit card to load funds onto the smartcard. Although the S debit card is otherwise equipped with restrictions to prevent use of the card to purchase any items other than fare media, the restrictions do not work to prevent the employee loading funds onto the smartcard account holding funds that are available for either transit or nontransit use.
F does not require its employees to substantiate their use of the debit card. By contrast, G provides transportation benefit amounts directly to Z. G does not require its employees to substantiate their use of the smartcard. Employer H has been providing transit benefits to its employees via a bona fide cash reimbursement arrangement.
LAW Section 61 a 1 of the Code provides that, except as otherwise provided in subtitle A, gross income includes compensation for services, including fees, commissions, fringe benefits, and similar items. Section a 5 provides that any fringe benefit that is a qualified transportation fringe is excluded from gross income.
Section f 6 provides for an annual cost-of-living adjustment in the monthly limit. Sections f 5 A and 1. Section f 3 provides that a qualified transportation fringe includes a cash reimbursement by an employer to an employee for transit benefits.
However, a qualified transportation fringe includes a cash reimbursement by an employer to an employee for any transit pass only if a voucher or similar item that may be exchanged only for a transit pass is not readily available for direct distribution by the employer to the employee. A payment made before the date an expense has been incurred or paid is not a reimbursement.
In addition, a bona fide reimbursement arrangement does not include an arrangement that is dependent solely on the employee certifying in advance that the employee will incur expenses at some future date. The requirement that a voucher be distributed in-kind by the employer is satisfied if the voucher is distributed by another person on behalf of the employer. Examples of restrictions that effectively prevent the employer from obtaining vouchers appropriate for distribution to employees include advance purchase requirements, purchase quantity requirements, and limitations on denominations of vouchers that are available.
The employer must implement reasonable procedures to ensure that the amount equal to the reimbursement was incurred for transportation in a commuter highway vehicle, transit passes, or qualified parking. Sections b 16 and a 19 provide similar exclusions for FUTA and Federal income tax withholding purposes, respectively. Originally scheduled to become effective January 1, , the effective date was postponed until January 1, Because terminal-restricted debit cards were not widely used when Rev.
In Notice —38, —24 I. The debit card provided by C does not qualify as a transit system voucher because it is possible that a MCC-restricted debit card may be used to purchase items other than fare media. A merchant properly classified to accept the debit card as payment may sell merchandise other than fare media, and there is nothing in the debit card technology which prevents its use to purchase items other than fare media.
With respect to expenses paid using the MCC-restricted debit card, C receives periodic statements providing information on the purchases made with the debit card, including the identity of the seller, and the date and amount of the debit card transactions. In addition, for the first month an employee uses the MCC-restricted debit card, C requires that the employee certify that the card was used only to purchase fare media. C does not require monthly certifications with respect to recurring items if the item described in the periodic statement matches with respect to the seller and the time period that have previously been substantiated as fare media expenses.