United States Air and Radiation EPA420-F-98-029
Environmental Protection December 1998
Agency
Office of Mobile Sources
&EPA Environmental
Fact Sheet
The Commuter Choice Program:
A Way to Save Money and
Help the Environment
Commuter Choice Programs encourage employers to offer flexible
commute options to their employees. These strategies help employers
and employees save money and help reduce pollution.
What is the Commuter Choice Program?
Under Commuter Choice programs, employers offer commuting options
that encourage employees to get to work in ways that pollute less than
driving alone. A Commuter Choice program can be developed by an
individual company or as part of a wider regional strategy. In addition,
Federal tax laws relating to transit, vanpool, and parking benefits now
provide tax savings for employers and employees who want to "Get
There with Clean Air!"
Commute Options
Commuter Choice programs encourage employers to provide their
employees transportation options in commuting to and from work.
These programs may include one, all, or a combination of the following
individual benefits:
• Free or reduced cost passes for public transportation, such as
subway cards, bus tokens, or train tickets.
• Transit or vanpool vouchers which can be used to pay for those
services.
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Services to facilitate carpooling and vanpooling such as providing
vans, ridematching, and a guaranteed ride home.
Telecommuting options (so employees can work at home more
often).
Proximate Commuting: a program that matches employees of multi-
site employers (such as banks or chain stores) to the branch office
nearest their home.
Incentives to bike or walk
Parking Cash Out: Employees can trade employer paid parking
space for cash or other benefits.
Tax Savings
Tax Savings from Commuter Choice vary depending on which commute
benefits are offered by the employer and how they are provided to the
employee. Below are three qualified methods:
1. In Addition to Compensation/Additional Benefit
Employees may receive the benefit in addition to their current wages.
Specifically, they can receive transit, vanpool, and parking benefits
completely free of all U.S. payroll and Federal income taxes. The em-
ployer pays for the benefit and receives a deduction from his Federal
business income taxes for the value of the benefit. The employer also
does not pay payroll related taxes or costs on the benefit.
2. In Lieu of Compensation/Pre-tax Benefit
An employer may permit employees to set aside some of their income,
before taxes, to pay for their commutes. Employees may use this pre-tax
income to pay for transit, vanpools, or parking. Employees would not pay
Federal income taxes or payroll taxes on the amount they elect to set
aside for the commute option, and employers would not pay U.S. payroll
taxes or other payroll related costs since the amount is treated as a benefit
rather than as taxable salary.
3. Cost-Sharing
Employers may share the cost of commuting to and from work with their
employees. They could do this through a combination of the two benefits
above.
Under the new tax law, employers can offer the specified benefits for
their employees' work commutes in addition to or in lieu of compensa-
tion, Federal-tax-free, up to these Federal limits:
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• • Up to $175 per month for parking at or near work site and transit
facilities
• Up to $65 per month for public transit
• Up to $65 per month for vanpool services
(For transit and vanpooling, this amount will increase to $100/month for
taxable years beginning after December 31, 2001.)
Note: Tax breaks on benefits only apply directly to transit, vanpool and
parking benefits. The 'cash option from Parking Cash Out and any other
monetary incentives are taxable for that employee. Subsidized parking
and other transportation benefits do not become taxable if an employer
offers them along with the Parking Cash Out option. Although the tax
laws do not specifically relate to benefits like telecommuting,
carpooling, biking, walking, and other commute options, employers may
still offer them. One way to provide incentive for these other options is
through Parking Cash Out, where employees can choose the cash benefit
and commute by these alternative modes.
Commuter
Choice
Benefits
Everyone
Employees:
Reduced Commuting Costs and Reduced Congestion - As a result of
participation in this program, employees have more choice in how to get
to work and how it is paid for. The tax savings or additional benefits
lessen the cost of commuting for the employee, no matter how the
benefit is offered, making it a win-win situation for that employee. The
opportunities provided depend on the employer and the available alterna-
tives in an area. As more and more people exercise Commuter Choice,
congestion on America's busy highways will decrease.
Environmental Protection - When commuters drive alone in large
numbers, they can contribute significantly to smog and air pollution. By
using carpools, vanpools, public transportation, or biking/walking they
are helping to make the environment cleaner for all Americans. Like
recycling, Commuter Choice programs can contribute to ensure a clean
and safe environment for ourselves and our children.
Parking Cash Out - Parking Cash Out gives an employee the option to
trade an employer-provided parking space for its cash value (up to $175)
or other benefits. If the cash is chosen, the employee can keep the money
and carpool, telecommute, bike or walk. The money itself is taxable as
income for that employee. Employees retain the option of keeping the
tax-free parking space.
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Employers:
Tax Savings - The Commuter Choice benefits that the employer pays for
can be deducted from Federal business income taxes. In addition, no U.S.
payroll taxes or other payroll related costs are required on the benefits
either, whether the employer pays for them or offers them in lieu of
compensation.
Enhanced Recruitment and Retention - With additional benefits,
employers stand out in the competitive market for qualified employees.
By offering a choice of commute option benefits, an employer can re-
spond to the differing needs of these employees. Commuter Choice
programs are attractive because they can help alleviate some of the
problems associated with commuting.
Parking and the Business - Reducing employee demand for parking can
free up parking spaces for customers, or the space can be converted for
other revenue producing purposes. It also has the potential to remove the
need for expensive new parking construction.
States and Cities:
State and local areas can apply emission reductions achieved through
Commuter Choice programs toward meeting national air quality stan-
dards. Specifically, States and local areas can include Commuter Choice
programs in State Implementation Plans (SIPs), which outline how air
quality in the region will be improved.
For More This document and additional information on transportation and air
i v/i iviwi c quality are available electronically at the TRAQ Center on the EPA
Information Internet server at:
http://www.epa.gov/oms/traq
For a hard copy of this document, call the National Service Center for
Environmental Publications (NSCEP) at (800) 490-9198.
For more information, please contact:
Deanne Upson
US Environmental Protection Agency
Transportation Air Quality (TRAQ) Center
2000 Traverwood Dr.
Ann Arbor, MI 48105
phone: (734) 214-4283
fax: (734) 214-4052
e-mail: upson.deanne@epa.gov
Or call the TRAQ Center Information Request Line at:
(734) 214-4100
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