I. Introduction

This Technical Information Release (“TIR”) explains the Massachusetts personal income tax tie-in to the federal personal income tax exclusion for employer-provided parking, transit pass and commuter highway vehicle benefits allowed to employees.  The TIR describes the impact for 2013 of the Massachusetts adoption of this federal exclusion based on the January 1, 2005 Code provisions that provide the annual exclusion benefit. For tax year 2013 the Massachusetts monthly exclusion amounts are $245 for employer-provided parking and $125 for combined transit pass and commuter highway vehicle transportation benefits, as further explained below.[1] 

II. Discussion

In general, the Massachusetts personal income tax follows the provisions of the Internal Revenue Code (“the Code” or “IRC”), as amended on January 1, 2005 and in effect for the taxable year, in determining Massachusetts gross income.  In particular, Massachusetts follows IRC § 132(f) as amended and in effect on January 1, 2005, which excludes from an employee’s gross income (subject to a monthly maximum) employer-provided parking, transit pass and commuter highway vehicle transportation benefits.[2] 

In January, 2013, a federal Act amended IRC §132(f), increasing the federal monthly exclusion amount for the transit pass and commuter highway vehicle transportation benefits to equal the exclusion amount for the employer-provided parking benefit for both the 2012 and 2013 tax years.[3]  Massachusetts does not adopt the 2012 and 2013 exclusion amount increases to the transit pass and commuter highway vehicle transportation benefits, given that they were enacted subsequent to January 1, 2005.[4] 

III.  Massachusetts 2013 Tax Year Inflation Adjustments for Employer-Provided Parking, Transit Pass and Commuter Highway Vehicle Benefits

Annually, the IRS issues a revenue procedure announcing the calculated inflation adjustments, if any, as to dollar amounts set forth in certain Code provisions, including the exclusion amounts for employer-provided parking and the combined transit pass and commuter highway vehicle benefits referenced in IRC § 132(f). For tax year 2013, the IRS has calculated, based on the January 1, 2005 Code, a monthly exclusion amount of $245 for employer-provided parking. Massachusetts adopts this number given that this calculation is based upon the January 1, 2005 Code.[5]  For tax year 2013, the IRS has not calculated a monthly exclusion amount for the combined transit pass and commuter highway vehicle benefit. Therefore, for Massachusetts personal income tax purposes, the inflation adjustment was independently calculated under the formula provided in the January 1, 2005 Code, resulting in the 2013 monthly exclusion amount of $125 for combined transit pass and commuter highway vehicle transportation benefits.[6] 



/s/Amy Pitter
Amy Pitter
Commissioner of Revenue


AP:MTF:jmw

January 31, 2013

TIR 13-2



[1] Transit pass and commuter highway vehicle transportation benefits are combined for purposes of sharing the $125 maximum monthly exclusion.  For example, if an employee receives a $100 monthly transit pass and a $100 monthly commuter highway vehicle transportation benefit, the $75 excess would be includible in the employee’s wages for income and employment tax purposes.
[2] Massachusetts does not adopt the federal qualified bicycle commuting reimbursement.  See IRC 132(f)(D), effective for tax years beginning after December 31, 2008 and added by the federal Energy Improvement and Extension Act of 2008 (P.L. 110-343).
[3] The American Taxpayer Relief Act of 2012 (P.L. 112-240).
[4] For tax year 2012 the Massachusetts monthly exclusion amounts are $240 for employer-provided parking and $125 for combined transit pass and commuter highway vehicle transportation benefits. See TIR 12-1. In contrast, the federal monthly exclusion amounts for 2012 for combined transit pass and commuter highway vehicle transportation benefits were retroactively increased to $240 by the American Taxpayer Relief Act of 2012 (P.L. 112-240), while the 2012 federal monthly exclusion remained $240 for employer-provided parking.  In Notice 2013-8, the Internal Revenue Service established a special federal administrative procedure for employers providing transit benefits in excess of $125 in 2012.  No special procedure is required or authorized in Massachusetts, however, because the tax year 2012 Massachusetts monthly exclusion amounts have not changed. 
[5] Revenue Procedure 2013-15.
[6] IRC, §§ 1(f)(3), 132(f)(6).