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Latest Insights on COVID-19

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Latest Insights on COVID-19

Corporate Benefits

IRS Provides FAQ on Relief for Rule on Van Pools Affected by COVID-19

December 21, 2020

On December 3, 2020, the IRS released an FAQ about COVID Relief for Van Pools which explains temporary relief from certain conditions normally required for vanpooling benefits to be excluded from employees’ income as a fringe benefit.

As background, “vanpooling” refers to transportation in a commuter highway vehicle between an employee’s residence and place of employment. Further, a commuter highway vehicle is required to have the seating capacity of six or more adults (excluding the driver), and a minimum of 80% of the vehicle’s reasonably expected annual mileage must be used to transport employees between their residences and their place of employment. Importantly, commuting miles only count towards that 80% if the number of employees transported is at least 50% of the vehicle’s adult seating capacity (excluding the driver). This is commonly referred to as the “80/50 requirement.”

In light of the ongoing public health emergency, the IRS explains that if the employer reasonably expected at the beginning of the 2020 calendar year that at least 80% of the vehicle’s mileage would be used for vanpooling (meeting the 80/50 requirements mentioned above), but because of the ongoing COVID-19 emergency such requirements were not satisfied, the vehicle is still considered a commuter highway vehicle for the duration of 2020 so long as the seating capacity is at least six adults (excluding the driver). (For the purpose of this relief, the COVID-19 emergency commenced on the date of the president's emergency declaration, March 13, 2020.) Meaning, provided the other requirements of being a qualified transportation fringe benefit are met, up to $270 per month of the value of the van pool transportation provided by an employer and cash reimbursements from an employer to its employees for expenses related to an employee-operated van pool may be excluded from employees’ income. This relief applies to van pools using employer-operated or employee-operated vehicles.

Employers should be aware of this relief when administering fringe benefits.