Transportation fringe benefits.

Effective July 1, 1991, the Internal Revenue Service enhanced two employer-provided fringe benefits related to commuting by workers. The former tax-free exclusion, allowing an employer to give employees public transit passes, tokens or fare cards for commuting provided the value did not exceed $15 per month, has been increased to $21 per month [regulations section 1.132-6(d)].

Also, the method for valuing employer-provided transportation to and from the workplace due to unsafe conditions has been simplified. Formerly, the value of such transportation was includable in the employee's income under fair-market valuation principles. Effective July 1, the employee may be taxable at a standard rate of $1.50 per oneway commute. To qualify for this simplified method, the transportation must be furnished solely because of unsafe conditions to an employee who would otherwise walk or use public transportation for commuting and must conform to a written employer policy prohibiting use of the transportation for any reason other than unsafe conditions. Furthermore, the transportation must be provided to hourly employees and cannot include highly compensated individuals [proposed regulations section 1.61-2(k) of 5/20/91].

Observation: While tax-free or reduced-value fringes are primarily of benefit to the employee, the employer gains when these are substituted for compensation that otherwise causes FICA and other payroll taxes.