Illinois law creates the Transportation Benefits Program Act (HB 2068), which, effective January 1, 2024, requires that Illinois employers with 50 or employees in designated transit zones provide transit benefits to their covered employees.

Covered employers

A covered employer is (1) any individual, partnership, association, corporation, limited liability company, government, non-profit organization or business trust that (2) directly or indirectly, or through an agent or any other person, employs or exercises control over wages, hours or working conditions of an employee and (3) that employs 50 or more covered employees at an address that is within one mile of a fixed-route transit service.

Covered employers are those located within one or more of the following 38 designated Illinois transit zones:

Covered employees

Employees who perform an average of 35 hours of work per week for compensation on a full-time basis are eligible for transit benefits under the law.

Transit benefits must be offered to all covered employees starting with their first full pay period after 120 days of employment.

Transit benefits

Covered employers are required to allow covered employees to purchase transit passes with pre-tax dollars through payroll deduction up to the federal limit under IRC Section 132(f). An employer also may comply with this requirement by participating in a program offered by the Chicago Transit Authority or the Regional Transportation Authority.

Ernst & Young LLP insights

Illinois is now the second state, after New Jersey (see Tax Alert 2019-0588), to require that employers provide pre-tax transit benefits to their employees. In addition, the District of Columbia requires employers to offer employees clean-air transportation alternatives to parking benefits through pre-tax fringe benefits or pay a compliance fee (see EY Tax Alert 2022-1787.)

Numerous localities require that employers provide transit benefits to their employees, most recently, Philadelphia, which, effective December 31, 2022, requires that employers with 50 or more covered employees provide mass transit or bicycle commuter benefits to covered employees under its Employee Commuter Transit Benefit Program. (See Tax Alert 2023-0471.)

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Published by NTD’s Tax Technical Knowledge Services group; Andrea Ben-Yosef, legal editor