Attached for public and practitioner comment is draft TIR 13-X, Massachusetts Tax Year 2014 Exclusion Amounts for Employer-Provided Parking, Transit Pass and Commuter Highway Vehicle Benefits.  The TIR describes the impact for 2014 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 2014 the Massachusetts monthly exclusion amounts are $250 for employer-provided parking and $130 for combined transit pass and commuter highway vehicle transportation benefits.  Please email any comments on the draft TIR no later than December 13, 2013 to the following address: rulesandregs@dor.state.ma.us.

 

WORKING DRAFT FOR PRACTITIONER COMMENT - 11/26/13

 

Personal Income Tax

Technical Information Release 13-XX

 

Massachusetts Tax Year 2014 Exclusion Amounts for Employer-Provided Parking, Transit Pass and Commuter Highway Vehicle Benefits

 

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 2014 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 2014 the Massachusetts monthly exclusion amounts are $250 for employer-provided parking and $130 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 previous tax years federal Acts have 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.  Massachusetts did not adopt the 2012 and 2013 tax year exclusion amount increases to the transit pass and commuter highway vehicle transportation benefits, given that they were enacted subsequent to January 1, 2005.[3]

The provision in the federal Act that extended the increased federal monthly exclusion amount for the transit pass and commuter highway vehicle transportation benefits is due to expire on December 31, 2013.[4]  Therefore, for tax year 2014 the federal monthly exclusion amounts for transportation benefits are calculated based on IRC § 132(f) as it appeared in the January 1, 2005 Code.

III.  Massachusetts 2014 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 2014, the IRS has calculated, based on the January 1, 2005 Code, a monthly exclusion amount of $250 for employer-provided parking and $130 for combined transit pass and commuter highway vehicle transportation benefits. Massachusetts adopts these monthly exclusion amounts given that these calculations are based upon the January 1, 2005 Code.[5]  


 

WORKING DRAFT FOR PRACTITIONER COMMENT - 11/26/13



[1] Transit pass and commuter highway vehicle transportation benefits are combined for purposes of sharing the $130 maximum monthly exclusion.  For example, if an employee receives a $100 monthly transit pass and a $100 monthly commuter highway vehicle transportation benefit, the $70 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] See TIR 13-2.  For tax year 2012 the Massachusetts monthly exclusion amounts were $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 was required or authorized in Massachusetts, however, because the tax year 2012 Massachusetts monthly exclusion amounts did not change. 

[4] The American Taxpayer Relief Act of 2012 (P.L. 112-240).

[5] Revenue Procedure 2013-35.  Note that if Congress acts to amend IRC § 132(f), Massachusetts will not automatically adopt any changes to the exclusion amounts.