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March 20, 2019
2019-0588

New Jersey is first state requiring employers to offer pretax transportation fringe benefits to employees

New Jersey Governor Phil Murphy recently approved legislation that will require employers of 20 or more employees to offer pretax transportation fringe benefits to employees. The legislation (SB 1567) will take effect upon the earlier of March 1, 2020 or the effective date of regulations to be adopted by the New Jersey Department of Labor & Workforce Development.

Employees may elect to exclude from taxable income qualified transportation benefits (except parking) up to the maximum level allowed by federal law (IRC Section 132(f)). For 2019, the federal limit is $265 per month for transit and van pool benefits.

Employers found to be noncompliant may be assessed a civil penalty of $100 to $250 for the first violation. Employers will have 90 days from the date of the violation to offer the pre-tax transportation fringe benefit program to employees before the fine is imposed. After 90 days, each additional 30-day period in which an employer fails to offer the benefit is a subsequent violation subject to a $250 penalty.

Ernst & Young LLP insights

New Jersey is the first state to require that employers provide transportation fringe benefits to their employees, but several localities have a similar mandate (e.g., Berkeley, Los Angeles, Richmond, and San Francisco, California; New York City; Seattle (EY Payroll Newsflash 2018-2132 ); and Washington, DC).

See our special report for more information on localities that mandate employers provide commuting benefits and the implications under the federal Tax Cuts and Job Act (TCJA).

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Contact Information
For additional information concerning this Alert, please contact:
 
Workforce Advisory Services - Employment Tax Advisory Services
   • Kenneth Hausser (kenneth.hausser@ey.com)
   • Debera Salam (debera.salam@ey.com)

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