The Taxpayer Relief Act of 1997 Public Law 105-34 Signed August 5th

Dear Colleague:

I am pleased to inform you that on August 5, 1997, the Taxpayer Relief Act of 1997 (TRA), Public Law 105-34, was signed into law by President Clinton. his Act made numerous changes to the Internal Revenue Code (IRC), including a provision permitting employers to offer employees the option of accepting a taxable salary equivalent in lieu of tax-free parking benefits This provision was part of our surface transportation reauthorization plan, the National Economic Crossroads Transportation Efficiency Act (NEXTEA).

Prior to passage of the TRA, the IRC prohibited employers from offering employees the choice between a tax-free parking benefit and a taxable salary equivalent. If such choice was offered by employers, the parking benefit would no longer be treated as tax free, regardless of whether any employee chose to receive the taxable salary equivalent

Under the changes made by the TRA, effective during tax years beginning after December 31, 1997, employers may now offer employees the option of receiving either tax free parking or taxable salary without losing the parking tax exemption for those employees who choose to keep their parking spaces. The TRA does not affect either the transit or vanpool benefit program provisions. The actual language of the revised Section 132(f)(4) is enclosed as well as a paper prepared by Apogee Research that explains the commuter benefit provisions of the Act.

This change gives employees greater freedom to choose how they commute to work, without affecting the IRC provision that exempts up to $170 per month for parking benefits and up to $65 per month in transit or commercial vanpool services from Federal and most state income and payroll taxes. Employees whose only transportation benefit is parking can now accept a salary enhancement instead, leave his/her automobile at home, and use transit, walk, vanpool, carpool, or ride a bicycle to work. This greater flexibility should reduce single occupant vehicle trips from our highways and therefore contribute to reduced congestion, a cleaner environment, and increased energy conservation.

Please encourage your constituents, membership, and customers to take advantage of this change to the IRC. Providing salary instead of a parking space will not increase costs to employers. On the contrary; by improving and making employee benefits more flexible, employers will better be able to attract and retain highly motivated and well-qualified employees to meet the challenges that lie ahead.

If you have any questions regarding these changes to the IRC, please contact Mr. William B. Menczer, Federal Transit Administration, on (202) 366-4060 or Mr. Thomas P. Keane, Federal Highway Administration, on (202) 366-0570.

Sincerely yours,
Gordon J. Linton

Enclosures