Country / Language

New York City’s New Commuter Benefits Law


11/24/15

Synopsis

On October 20, 2014, New York City Mayor Bill de Blasio signed the Affordable Transit Act into law.  The law, which takes effect in 2016, requires employers in the city to offer pretax transit benefits to their full-time employees.

The Affordable Transit Act

The New York Transit Ordinance is a new law that mandates employers allow full-time employees the opportunity to use pre-tax earnings to purchase qualified transportation fringe benefits.

Who Will be Affected?

Employers, both non-profit and for-profit, with 20 or more full-time employees in New York City will be required to offer their full-time employees the opportunity to use their pre-tax income to pay for their commute.  For these purposes, “full-time employees” are employees who work an average of 30 hours or more per week.

Effective Dates

The new law takes effect January 1, 2016, provided that qualified transportation benefits are still excludible from an employee’s gross income for federal income tax purposes and from an employer’s wages for federal payroll tax purposes. To give businesses adequate time to adjust to the new ordinance, the Department of Consumer Affairs will not impose penalties for noncompliance until July 1, 2016. The new law also gives employers 90 days to correct a violation before penalties will be applied. Penalties for initial violations will range between $100 and $250.

Exemptions

Certain employers are exempt from the new law, including:

  • The federal government
  • The state of New York
  • The city of New York
  • An employer that has a collective bargaining agreement in existence between any group of employees.
  • An employer that is not required to pay federal, state and city payroll taxes.
  • An employer that can demonstrate to the satisfaction of the Department of Consumer Affairs that the offering of this benefit would pose a financial hardship to the employer.

     

What Does CohnReznick Think?
The required benefit is defined in terms of “qualified transportation fringe benefit;” as such only those individuals who are eligible are covered by the requirement. Specifically, self-employed individuals, partners, independent contractors and two percent shareholders of subchapter-S corporations are not eligible to receive “qualified transportation fringe benefits” under IRC Sec. 132(a)(5).

The term “2-percent shareholder” means any person who owns, on any day during the taxable year of the S corporation, more than 2 percent of the outstanding stock of such corporation or stock possessing more than 2 percent of the total combined voting power of all stock of such corporation.

Employers should be aware of their responsibilities under the law and will need to decide if they intend to manage the benefits program themselves or obtain a third party provider. Employers electing to obtain a third party provider should be aware that the administrative fees vary among providers depending on the level of service necessary and the number of participating employees. Employers should consult their tax advisor to determine the administrative requirements and restrictions.

Contact

For more information, please contact Corey Rosenthal, JD, Principal who leads the Firm’s State and Local Tax Services Practice in New York, at corey.rosenthal@cohnreznick.com or 646-625-5729, or John Morhart, Director, at john.morhart@cohnreznick.com or 646-762-3460.


Any advice contained in this communication, including attachments and enclosures, is not intended as a thorough, in-depth analysis of specific issues. Nor is it sufficient to avoid tax-related penalties. This has been prepared for information purposes and general guidance only and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is made as to the accuracy or completeness of the information contained in this publication, and CohnReznick LLP, its members, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.
 

Search Our People

Search Our People

Look ahead. Gain insight. Imagine more. Is your business ready to break through?

View our new TV commercial..

Industry Outlooks

Industry Outlooks

Gain insight into what is ahead for the Commercial Real Estate, Technology and Middle Market Private Equity industries.

READ MORE

Learn about our upcoming events.

READ MORE

Working With Us

Working With Us

What makes CohnReznick different from others in our profession? And what should our clients come to expect when working with us? The answer is The CohnReznick Advantage. Contact us to learn how we can out the CohnReznick Advantage to work for your business.


People

The value of an organization is determined by the skills and qualities of its leaders. With more than 280 partners serving clients nationwide, CohnReznick is renowned for the diverse experiences, knowledge and backgrounds of its leadership.

Learn More

Services

We align our services in three segments: Accounting and Assurance, Tax, and Advisory. This approach allows us to provide holistic solutions to complex business problems and to seize upon opportunities requiring an integrated approach.

Learn More

Industries

Accounting and tax issues different significantly based on an organization's industry. We provide clients with expertise in nearly two dozen industries – we know the opportunities, the obstacles, the competitive landscape.

Learn more

Insights

CohnReznick professionals are thought leaders in their industries. Clients benefit from relevant and timely economic, legislative and industry insights that can keep them a step ahead of competition.

Learn More

Global Reach

Our involvement in the Nexia International network of firms enables us assist our clients wherever they do business-providing local expertise and connections wherever they needed. Nexia is comprised of 20,000 professionals operating in over 100 countries.

Learn More