Updated September 18th, 2024

While there is no federal law mandating that employers or organizations of a certain size offer pre-tax transit benefits to their employees, Section 132(f) of the IRS Code allows for employers to offer nontaxable qualified transportation fringe (QTF) benefits. With the cost of commutes rising, and municipalities looking for ways to reduce carbon emissions, transit benefit mandates in-line with Section 132(f) have been enacted across the country. Do you know if your organization is required to comply with a local transit benefit ordinance? 

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Chicago, Illinois and the surrounding Metro area
Illinois’ HB2068 is one of the most recent commuter benefit mandates, taking effect in January, 2024. The new Transportation Benefits Program Act applies to much of the state–not just larger cities, like many other benefit ordinances we’ve seen. Employers with more than 50 full-time (35 or more hours per week) employees located within a mile of fixed-route transit service inside the six-county RTA region, must offer pre-tax transit benefits to their employees. New hires can get access to this benefit after four months of employment.

Theresah Mah, chief sponsor of the new bill, said “I am thrilled that the RTA’s Transit Benefit Fare Program will be offered at more places of work than ever before. This program makes transit more affordable and easier to use, allowing residents to take part in our efforts to promote greener, more sustainable ways to travel.”

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Philadelphia, PA
‍Starting in 2023, Philadelphia required employers with 50+ employees to “offer an employee-paid, pre-tax payroll deduction, or provide an employer-paid direct benefit such as a public transit key card or transportation shuttle.” The ordinance was signed by Mayor Jim Kenney in June 2022, and applies to employees who have worked more than 30 hours per week for the same employer in the past twelve months. According to the ordinance, employers are only required to offer the benefit if employees ask for it

Helen Gym, the council member who sponsored the ordinance, said, “By bringing new riders into our city’s public transit network - this program will make our streets less congested, our air cleaner, and our city safer.” (Looking to offer transit benefits to your employees? Fill out our interest form here, and our team will be in touch with you.)

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New Jersey
‍NJ Governor Phil Murphy signed a commuter benefits law that went into effect on March 1st, 2020. Covering the entirety of the state, the law makes it mandatory for employers with over 20 full-time employees to offer pre-tax transit benefits.

As Senator Loretta Weinberg said during the law’s signing: “Commuting costs, for the most part, are a predictable expense. If you asked someone how much they spend on their commute each month, most people could give a quick estimate off the top of their head. This bill will allow workers across the state to set aside money to go towards their transportation expenses, like park-and-ride parking or transit passes, pre-tax. This would offer valuable savings to many New Jerseyans struggling to make ends meet.”

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New York City, NY
New York City’s Commuter Benefit Law has been in place since 2016, and applies to non-profit and for-profit employers with at least 20 non-union, full-time employees. This also includes employers with multiple NYC locations that may have less than 20 employees in each location. Unlike Philadelphia’s law, NYC employers must offer pre-tax transit benefits whether or not an employee has requested them. New York’s law includes the following

• New York City regional mass transit services, including Metropolitan Transportation Authority (MTA) subway and bus; Long Island Rail Road; Amtrak; New Jersey Transit; and Metro-North.
• Eligible ferry and water taxi services.
• Eligible vanpool services.
• Eligible commuter bus services.
• Access-A-Ride and other area paratransit providers.

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Washington, DC
‍Enacted in 2019, DC’s transit benefit law applies to employers with 20 or more employees. The law requires eligible employers to offer one of the following to their employees:

• An employee pre-tax election transportation fringe benefits program that provides employees the option of pre-tax payment for transit.
• An employer-paid benefit program whereby the employer supplies, at the election of the employee, either a transit pass for the public transit system requested by the covered employee or reimbursement of vanpool or bicycling costs in an amount at least equal to the purchase price of a transit pass for an equivalent trip on a public transit system.
• Employer-provided commuter transportation at no cost to covered employees in a shuttle, vanpool, or bus operated by or for the employer.

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For employers who do not offer any transit benefits, they can be fined. Employers must also have a designated contact person for benefits questions, and must tell their employees about the benefits available to them. As per the law’s text, “The purpose of the Act is to reduce single occupancy vehicle use by encouraging employers to provide transit benefits to their employees.” 

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Seattle, WA
‍Passed by Seattle’s city council in 2019, SMC 14.30 requires employers with twenty or more employees worldwide to offer those employees the ability to put pre-tax funds towards transit or vanpool services. Notably, the ordinance does not include a similar rule for pre-tax funds being used on parking. Employers also have the ability to offer a transit pass instead of the pre-tax deduction, but that pass must be subsidized by the employer by at least 30% of the cost of the pass. This way, employees get a similar amount of savings as they would if they were using pre-tax funds. Similar to DC, there is also a notice requirement for Seattle employers offering the transit benefit. 

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San Francisco Bay Area
The Bay Area Commuter Benefits Program’s stated goal is “to improve air quality, reduce emissions of greenhouse gases and other air pollutants, and decrease traffic congestion in the San Francisco Bay Area by encouraging employees to commute to work by transit and other alternative commute modes.” To that end, since 2014, employers in the Bay Area Air Quality Management District with more than fifty employees must provide at least one of the following transit benefits:

• A pre-tax benefit that allows employees to exclude their transit or vanpool cost from taxable income.
• An employer-provided transit subsidy.
• An employer-provided shuttle or vanpool.
• An alternative commuter benefit that is as effective in reducing single occupancy vehicle trips.
• A telework policy that allows telework one or more days a week for all employees whose assignments can be performed remotely. 

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Berkeley, CA
As part of their Tax Relief Action to Cut Commuter Carbon (TRACC), employers in Berkeley with over ten employees must provide a commute program to encourage employees to use public transit, vanpools, or bicycles. Read the full text of the law here. Employers must offer one or more of the following options:

• Provide a pre-tax payroll deduction program, allowing employees to use up to $125 in pre-tax wages for public transit or vanpool expenses.
• Pay for employee’s public transit, vanpool, or bicycle expenses.
• Provide free shuttle service between home and work on a company-funded vehicle.

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Richmond, CA
Richmond, CA has its own commuter benefits mandate. "Covered employers"–defined as employers within Richmond with ten or more full-time, part-time, or contracted hires–must offer one of the following:

• A Pre-Tax Election. A program, consistent with Internal Revenue Code Section 132(f), allowing employees to elect to exclude from taxable wages and compensation, employee commuting costs incurred for transit passes or vanpool charges or bicycle commuting (but not for parking), up to maximum level allowed by federal tax law, which is presently two hundred and thirty dollars ($230) per month for transit and qualified vanpools, and, upon passage of HR 863 or other relevant legislation, twenty dollars ($20) per month for bicycles; or

• Employer Paid Benefit. A program whereby the employer supplies a transit pass or reimbursement for equivalent vanpool charges at least equal in value to the purchase of the appropriate benefit which shall not exceed the cost of an adult monthly AC Transit regular pass, which is presently seventy dollars ($70), for the public transit system requested by each employee or to reimburse qualified vanpool charges; or

• Employer Provided Transit. Transportation furnished by the employer at no cost to the employee in a vanpool or bus, or similar multi-passenger vehicle operated by or for the employer.

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Hawaii
Hawaii has a voluntary commuter benefits program that will probably sound familiar. Counties in Hawaii may "adopt an ordinance establishing a commuter benefits program," including one of the following options

• A program, consistent with section 132(f) of the Internal Revenue Code of 1986, as amended, allowing covered employees to elect to exclude from taxable wages costs incurred for transit passes, vanpool charges, and bicycle commuting costs up to the maximum amount allowed by federal tax law.

• A program whereby the employer offers employees a subsidy to offset the monthly cost of commuting via transit, vanpool, or bicycle. The subsidy shall be equal to the lesser of the monthly cost of a transit pass or the monthly cost of a vanpool; provided that a subsidy for bicycle costs shall be in addition to subsidies for transit and vanpool costs; or

• Transportation furnished by the employer at no cost or low cost, as determined by the designated authority, to employees in a vanpool, bus, or similar multi-passenger vehicle operated by or for the employer.

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Maryland
While Maryland does not have a standard commuter benefits mandate, Maryland employers may be eligible for the Commuter Tax Credit by providing their employees with commuter subsidies. For qualified commuter benefits like Guaranteed Ride Home, Vanpool, Transit, Cash in Lieu of Parking, Telework, Carpool, Active Transportation, and Multimodal Commuter Last Mile Connection, employers can claim 50% of the value of their employee transit subsidies (up to $100 per employee per month) as a tax credit.

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States where it's illegal for cities to pass commuter benefit laws (yep, those exist!)

Alabama, Arkansas, Florida, Georgia, Indiana, Iowa, Kansas, Michigan, Missouri, North Carolina, South Carolina, Texas, Wisconsin.

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Jawnt works with both employers to help them with the administration of transit benefit programs and compliance with transit benefit mandates. Want to see what Jawnt can do for you? Reach out to our team here.

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