Qualified Transportation Fringe Benefits (QTF)

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Section 132(f) of the IRS Tax Code allows employers of a certain size to offer non-taxable Qualified Transportation Fringe (QTF) benefits to their employees.

Employer QTF benefits are not mandated by the IRS, however, many municipalities and even states are now requiring employer-based transit benefits as part of their overall transportation solutions. Due to growing concerns about traffic congestion, environmental sustainability, transit deserts, and health concerns surrounding emissions, QTF benefits are being made mandatory..

Although commuter QTF benefits are not required here in central Pennsylvania, volunteering to offer these benefits provides many advantages for your company, your employees, and your community. So much so, some of our neighbors are already implementing mandatory QTF benefits.

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.

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.”

While Maryland does not have a standard QTF 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.

‍‍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.”