Magazine article The CPA Journal

Final Amendments to the Fringe Benefits Regulations

Magazine article The CPA Journal

Final Amendments to the Fringe Benefits Regulations

Article excerpt

Final amendments have been made to two provisions of the fringe benefit regulations concerning the taxation and valuation of fringe benefits and the exclusion from gross income for certain fringe benefits.


There are two employer provided transportation fare rules contained in the de minimis fringe benefit regulations under IRC Sec. 132(e) of the code. The first de minimis fringe benefit rules, set forth in Reg. Sec. 1.132-6(d)(2)(i), provides that the cost of local transportation fare is totally excludable from an employees gross income, regardless of gross income, as a de minimis fringe benefit, as long as the benefit is considered reasonable and is provided to the employee on an occasional basis. An example of an occasional basis would be an employee working overtime that would extend normal working hours.

The second de minimis fringe benefit rules contained in Reg. Sec. 1.132-6(d)(2)(iii), only provides for a partial exclusion from gross income for local transportation that is provided to the employee for commuting to and from work because of unusual circumstances. This exclusion is only available to those "noncontrol" employees who are provided local transportation because it is considered unsafe to use other available local transportation. The definition of "control" employees (for 1991), contained under Reg. Sec. 1.61-21(f)(5), includes all officers, directors, 1% owners, or any employees earning $121,070 or more. Reg Sec. 1.61-21(f)(6) defines a government "control" employee to include any elected official or any government employee earning $101,300 or more. The determination of whether unusual circumstances exist is based on facts and circumstances. A factor in considering if an area is defined as unsafe is the history of crime in the area of the employees residence or work place and if a reasonable person would consider the area unsafe during the time of day that the employee must commute.

For noncontrol employees, if unusual circumstances and unsafe conditions exist, the value in excess of $1.50 for each one-way commute provided by the employer to the employee between work and home is excludable from the employees gross income. EFFECTIVE DATE. The de minimis fringe benefit rules described above apply as of July 1, 1991.


The special valuation rule of Reg. Sec. 1.61-21(K) provides an exclusion from gross income for local transportation fare to qualified employees without an overtime or unusual circumstance requirement. This special valuation rule applies only to "nonexempt" employees that are subject to the Fair Labor Standards Act of 1938 (as amended), 23 U.S.C. Secs. 210-213 (FLSA), that earn less than $60,535 in 1991 and who receive local transportation to or from work because of security reasons. …

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