Subtracts from federal adjusted gross income qualified transportation fringe benefits

Title of bill

An act to amend the tax law, in relation to qualified transportation fringe benefits

Purpose

To restore the New York State commuter pretax deduction benefit.

Summary of provisions

Section 1. Amends subsection (c) of section 612 of the tax law by adding a new paragraph 44 to make permanent the New York State pretax deduction benefit for commuting expenses for employees.

Section 2. Effective date.

Justification

Federal law permits employers to allow their employees to set aside a portion of their pretax wages to pay for transit, vanpool fares, and parking. In 2009, Congress approved an increase in the maximum transit benefit ($230/month), but required re-approval of the increase on an annual basis. An extension was approved in 2010, but Congress did not reauthorize another extension by the December 31, 2011 deadline. The result was that commuters' mass transit tax benefits were cut from $230 to $125 a month.

New York State mirrors this benefit, thus with Congress' failure to re-authorize the transit benefit in 2011, commuters saw both their state and federal benefits cut almost in half in 2012. Congress did finally approve an extension of the transit benefit at the eleventh hour in 2012 but, once again, it expired at the end of 2013. To date, Congress has not authorized a new extension of the transit benefit, and it does not appear likely that they will do so.

Washington's lack of action not only raised costs for commuters, it gave them new incentives to avoid mass transit all together. Commuters who drive in a carpool are allowed a similar pre-tax benefit to help offset parking costs under federal law. Unlike the pre-tax transit benefit, that law is permanent and indexed to inflation. This means that commuters who drive to work had their parking benefit increase to $240 a month in 2012 while mass transit riders' benefits were cut by nearly half. This disparity provided an incentive for commuters to drive to work and not use mass transit, increasing congestion and auto emissions.

This legislation is needed to protect commuters from losing their New York State monthly pre-tax transit benefit and to create parity on the state level between state pre-tax parking and transit benefits in the event that Congress again fails to act.

Legislative history

2015: Passed the Senate 2014: Passed the Senate (S.6397-A) 2013: Passed the Senate (S.770-B) 2012: Passed the Senate (S.2728C/A.61758) 2011: Passed the Senate (S.2728B/A.6175A)

Fiscal implications

Prior to December 31, 2011 this income was not taxed by the State, therefore there is no cost to the State. EFFECTIVE DATE : This act shall take effect immediately.