Starting January 1, 2016, nonprofits with offices in the District of Columbia containing 20 or more (full-time and/or part-time) employees who spend more than 50 percent of their time in the DC office must provide one of three commuter benefit options to their DC employees:
Option #1: Employee-Paid Pre-Tax Benefit, enabling employees to set aside $130 per month in pre-tax funds for transit or vanpool expenses or $20 per month for bicycling costs.
Option #2: Employer-Paid Direct Benefit, by which employers pay for transit expenses, vanpool expenses, or bicycling costs.
Option #3: Employer-Provided Transportation, consisting of vanpools from outside of DC or shuttles from Metro stations, park-and-rides, major hubs, or other locations.
This requirement emanates from the Sustainable DC Omnibus Amendment Act of 2014.
The Employee-Paid Pre-Tax Benefit amounts under Option #1 are the same as the IRS' Qualified Transportation Benefit limit for transit or vanpool expenses and bicycle expenses for 2016. The types of qualified benefits allowed under Option #1 are expressly tied to the Internal Revenue Code provisions for Qualified Transportation Benefits. This means that nonprofits that provide Employee-Paid Pre-Tax Benefits under Option #1 will be in compliance with the IRS rules for Qualified Transportation Benefits. Unlike existing IRS rules, the new DC law does not include a pre-tax qualified parking benefit. (Note that the DC Department of Transportation's "toolkit" on this new law mistakenly includes a parking benefit as part of Option #1; we have notified them of the error, and they will be correcting it in a future version of the document.)
The DC law does not provide for any minimum or maximum benefit amount for the Employer-Paid Direct Benefits under Option #2. To get the benefit of favorable tax treatment under the IRS Qualified Transportation Benefit, nonprofits should limit Option #2 benefits to $130 per month for transit or vanpool expenses and $20 per month for bicycling expenses. Otherwise, employees will be taxed on the excess amount.
As for Option #3, Employer-Provided Transportation, the IRS does not have a specific corresponding exemption. It would appear, however, that the Employer-Provided Transportation option would fall under the Qualified Transportation Benefit definition of "vanpool," because the new DC law identifies only vanpools and buses as choices for the employer to provide under Option #3. Thus, the employee presumably will not be taxed as long as the benefits per employee are less than the IRS' $130 per month vanpool limit discussed above.
To implement this new program, "goDCgo" suggests that, regardless of the option you select, you will want to survey your employees about their commuting needs and desires, decide whether to manage the program in-house or through a vendor, create a Commuter Transit Benefits Policy, and communicate the program to your employees. Employees also are encouraged to enroll in the Guaranteed Ride Home program, which provides transportation four times a year when unexpected circumstances create an unusual commuting need.
In terms of understanding the "20 employees in the District" requirement, the DC Department of Employment Services has advised us informally that, borrowing from the DC Minimum Wage Act Revision Act of 1992, the Department interprets this to mean 20 full-time and/or part-time employees who spend more than 50 percent of their time in their DC office. Alternatively, read with another relevant section of the DC Code, to meet the trigger of being counted for purposes of this new requirement, it would appear that if the employee "regularly spend[s] a substantial amount of their working time in the District of Columbia and not more than 50 percent of their working time in any particular state," they also would be covered.
The penalty for noncompliance is a civil fine under the DC Civil Infractions Act.