Proposed regulations provide guidance on qualified transportation fringe benefits

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June 2020

Overview

The IRS and Treasury have released proposed regulations interpreting the deduction disallowance for expenses for providing qualified transportation fringe benefits to employees and for paying or reimbursing employees for commuting expenses.  The regulations are proposed to apply for tax years beginning on or after the date of publication of final regulations.  The preamble to the proposed regulations provides that, pending publication of final regulations, taxpayers may rely on the proposed regulations or, alternatively, on earlier interim guidance in Notice 2018-99 for expenses paid or incurred in tax years beginning after December 31, 2017. 

The takeaway

The proposed regulations provide greater flexibility in allocating expenses to disallowed parking than Notice 2018-99 by providing additional methodologies.  However, the proposed regulations lack similar detailed rules for computing the disallowance for expenses for providing transportation in a commuter highway vehicle or a transit pass QTF in kind.  The treatment of depreciation as not being a parking expense, continued from Notice 2018-99, is welcome.

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Brian Daily

Partner, PwC US

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