IRS proposes rules for elimination of commuting benefits deduction

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The Internal Revenue Service has issued a set of proposed regulations to provide guidance on the elimination of the deduction of qualified transportation fringe and commuting expenses in the Tax Cuts and Jobs Act.

The TCJA got rid of the traditional deduction for qualified transportation fringe expenses and generally doesn’t allow employers to claim the deduction for transportation and commuting expenses of their employees between their home and workplace anymore.

The 2017 tax overhaul originally also said a tax-exempt organization’s unrelated business taxable income would be increased by the amount of the qualified transportation fringe (QTF) expense that’s nondeductible. However, last December, that was repealed as part of the Further Consolidated Appropriations Act of 2020. The repeal was retroactive to the original date of enactment by the TCJA.

The proposed regulations that were released last Friday discuss various facets of the elimination of the deduction for expenses related to QTFs provided to an employee.They also include guidance and methodologies to figure out the amount of QTF parking expense that is nondeductible. The guidance provides some definitions and special rules to clarify and simplify the calculations underlying the methodologies.

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Tax regulations IRS Tax deductions Tax reform Tax laws