Notice 2009-95 delays the effective date from January 1,
2010 to January 1, 2011. The IRS said it delayed the effective date because certain
transit systems need additional time to complete the process of adapting their technology
to achieve compatibility with the requirements for transportation fringes.
The Internal Revenue Code dictates there are no employee
substantiation requirements if an employer distributes a transit pass,
including a voucher or similar item to employees. The code also says an
employer reimbursement is a qualified transportation fringe benefit if no
voucher or similar item is available to the employee in exchange for a transit
Revenue Ruling 2006-57 (see IRS Expands on Qualified Transportation Fringe Benefits) provides that smart
cards and terminal-restricted debit cards are considered vouchers since amounts
credited to the cards are only allowed to be used for transportation fares.
Amounts applied to these cards within the code’s limits are excludable from
gross income, and since the cards can only be used for transportation fares, no
employee substantiation for charges on the cards is required.
The ruling also
addressed the use of merchant category code (MCC)-restricted debit cards as a
transportation fringe benefit. The IRS determined that these debit cards may be
used as a qualified transportation fringe, but only where another voucher is
not readily available. Also, the card agreement must qualify as a “bona
fide reimbursement arrangement,” making employee substantiation of charges
to the card necessary.
Notice 2009-95 is here .
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