By Pension and Benefits Editorial Staff
The IRS has issued a frequently asked question (FAQ) regarding the use of van pools for the 2020 calendar year. If an employer reasonably expected the vehicle to meet the 80/50 requirement at the beginning of the 2020 calendar year, then the value of van pool transportation provided by an employer to its employees and cash reimbursements from an employer to its employees for expenses incurred in connection with an employee-operated van pool may be excluded from the employee's gross income as a qualified transportation fringe benefit for the 2020 calendar year, up to $270/month, provided the other requirements of Code Sec. 132(f) are satisfied.
Qualified transportation fringe benefits. For 2020, up to $270 per month in qualified transportation fringe benefits provided by employers may be excluded from income and wages of employees under Code Sec. 132(f). Qualified transportation fringe benefits include employer reimbursements made to employees for the cost of commuting between their residence and their place of employment in commuter highway vehicles that meet certain requirements, often called van pools. Van pools may be operated by employees, employers, or by private or public transit companies.
80/50 requirement. Vehicles used in a van pool operated by employees and employers must satisfy certain occupancy and mileage requirements for the reimbursements to be eligible for exclusion from income under Code Sec. 132(f). Specifically, employer-operated and employee-operated vehicles must have a seating capacity of at least 6 adults (not including the driver), and it must be reasonable to expect that for the year at least 80 percent of the mileage will be:
- for transporting employees between their residences and their place of employment, and
- used on trips during which the number of employees transported for commuting is at least 50 percent of the adult seating capacity (not including the driver).
These requirements are sometimes referred to as the 80/50 requirement.
Reasonable expectation. The FAQ indicates that, if, at the beginning of the 2020 calendar year, the employer reasonably expected that at least 80 percent of the vehicle's mileage for the year would be used to transport employees from their residences to their place of employment and that the number of employees transported in the vehicle would be at least 50 percent of the adult seating capacity of the vehicle (excluding the driver), but due to the COVID-19 emergency these requirements were not satisfied, then, provided the seating capacity is at least 6 adults (not including the driver), the vehicle would be considered a “commuter highway vehicle” within the meaning of Code Sec. 132(f)(5)(B) for the duration of 2020. For this purpose, the COVID-19 emergency is considered to have commenced on March 13, 2020, the date of the President's emergency declaration.
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