I wonder if my dear readers could educate me. Here’s where I got started: my employer’s payroll company, ADP, emailed me to say that as of this year, the mass-transit-pass employer fringe benefit reduces taxable income by as much as the parking-permit fringe benefit; it used to be that you got more for parking. I found this unjust, and was pleased when the injustice was corrected.
So now I want to go find the part of the law that rectifies the injustice. As per that earlier blog post, the relevant section of the tax law appears to be 26 USC 132.
First thing I seem to have discovered: you can’t understand any part of that law until you read all of it. Here’s the first relevant piece:
(f) Qualified transportation fringe
(1) In general
For purposes of this section, the term qualified transportation fringe means any of the following provided by an employer to an employee:
(A) Transportation in a commuter highway vehicle if such transportation is in connection with travel between the employees residence and place of employment.
(B) Any transit pass.
(C) Qualified parking.
(D) Any qualified bicycle commuting reimbursement.
(2) Limitation on exclusion
The amount of the fringe benefits which are provided by an employer to any employee and which may be excluded from gross income under subsection (a)(5) shall not exceed
(A) $100 per month in the case of the aggregate of the benefits described in subparagraphs (A) and (B) of paragraph (1),
(B) $175 per month in the case of qualified parking, and
In the case of any month beginning on or after the date of the enactment of this sentence and before January 1, 2012, subparagraph (A) shall be applied as if the dollar amount therein were the same as the dollar amount in effect for such month under subparagraph (B).
That final paragraph says “equalize transit passes and parking”. Got it. But two things:
1. ADP says that the benefit is $240 per month, which disagrees with the $175 in (f)(2)(B).
2. The final paragraph says that this equality of benefits ends when 2011 ends, which disagrees with ADP.
So I look around some more and I find two things that address these problems:
1. Section 6(A) in this same law applies an inflation adjustment — hence my statement that you need to read the whole thing to understand the rest. It seems to say that you take the CPI from the preceding calendar year and divide by the CPI for 1992, then multiply by whatever (f)(2)(A) or (f)(2)(B) say.
All right, so we consult the CPI. First of all, I don’t know what ‘the CPI for 1992’ means: does it mean January of 1992? It probably doesn’t much matter which part of 1992 I pick (we’re not Zimbabwe), so I’ll just grab 140.3, the annual average for 1992. Then we get 2012’s CPI, which is about 230. So the multiplier is 1.64. Multiply by the $100 in (f)(2)(A), and I only get $164 — not the $240 that ADP reported.
But again recall that final paragraph, quoted above. It says that mass transit and parking are equal. So let’s assume the pre-inflation-correction benefit is $175 per month, and again apply the 1.64 multiplier. That brings the mass-transit benefit up to $287 — which is now too *high*. So now I’m confused where the $240 came from that ADP mentioned.
2. The American Taxpayer Relief Act of 2012 extended benefit parity until the beginning of 2014, specifically
> SEC. 203. EXTENSION OF PARITY FOR EXCLUSION FROM INCOME FOR EMPLOYER-PROVIDED MASS TRANSIT AND PARKING BENEFITS.
> (a) IN GENERAL.Paragraph (2) of section 132(f) is amended by striking January 1, 2012 and inserting January 1, 2014.
> (b) EFFECTIVE DATE.The amendment made by this section shall apply to months after December 31, 2011.
The law as it’s archived at Cornell doesn’t seem to reflect this.
So I’m confused on three general points:
1. How do I know that I read all the parts of the bill that modify the particular paragraph I’m interested in? (John E. McDonough’s magisterial [book: Inside National Health Reform] explains very patiently the complicated way in which one needs to read the Affordable Care Act. Do I need a McDonough by my side to read any law? Do I need a Marion Nestle to walk me through the farm bill?)
2. How do I know that I’m looking at the most up-to-date version of a particular section of the law?
3. How do I know that there isn’t another section of the US Code that’s relevant to the particular policy — in this case, commuter fringe benefits — that I care about?