| Friday, October 1, 2004
Today Treasury and the IRS issued guidance to shut down an
abusive
employment tax arrangement involving double employer reimbursements
for an employee's parking expenses. The ruling clarifies that
employer
reimbursements for parking are not excludible from income
and wages
for employment tax purposes where the parking has already
been paid
for by the employee on a pre-tax basis (such as by salary
reduction
elections by employees). This ruling will not affect regular
arrangements between employers and their employees that provide
qualified parking benefits.
Generally, employer-provided qualified parking benefits,
including
employer reimbursements of qualified parking expenses paid
by an
employee, are excluded from income and wages for employment
tax
purposes. Where the parking is provided pre-tax, however,
employers
cannot then exclude the amounts twice by treating payments
to the same
employees as excludible reimbursements for parking.
"This is a classic 'double-dip' arrangement that recently
has come to
our attention," stated Acting Assistant Secretary for
Tax Policy Greg
Jenner. "Treasury and IRS have acted promptly to shut
it down,
enabling responsible taxpayers and their advisors to stay
away from
such double-dip arrangements in the future."
The ruling explains that since pre-tax parking is provided
by the
employer, and not the employee, there is no expense by the
employee
that can be reimbursed with excludible funds. Further, the
ruling
states that the position that such payments are excludible
reimbursements of qualified parking expenses is meritless.
As described in the ruling, the arrangement could be invisible
to the
employee, whose take home pay remains unchanged. The ruling
notes
that the payments remain taxable whether or not the payments
are
calculated to provide employees with the same net pay. The
holding
also states that it applies with respect to other double-dip
arrangements involving attempts to exclude alleged reimbursements
of
the cost of nontaxable benefits which are provided by employers
on a
pre-tax basis.
This Department of Treasury press release may be viewed at:
http://www.treas.gov/press/releases/js1974.htm
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