Understanding IRS Revenue Rulings on Transportation Benefits
School
Golden Gate University**We aren't endorsed by this school
Course
ACCTG 300
Subject
Accounting
Date
Dec 11, 2024
Pages
2
Uploaded by GeneralElement15413
Student Name: Paridhi InaniStudent ID: 0617418ACCTG 300: Accounting Research and CommunicationInstructor: Dr. Farima FakoorWeek 11- Chapter 11 Exercise Exercise 6a. Citation: Rev. Rul. 2014-32, 2014-50 I.R.B 1001 b. The following Internal Revenue Code sections are discussed in the ruling: •Section 132(a)(5): Qualified transportation fringes excluded from gross income. •Section 132(f): Defines transportation fringe benefits and monthly limits. •Section 132(f)(5)(A): Defines transit passes. •Section 132(f)(3): Conditions under which cash reimbursement is permitted. •Sections 3121(a)(20), 3306(b)(16), 3401(a)(19): Exclusions from wages for employment tax purposes. •26 CFR 1.132-9: Implementation regulations for qualified transportation fringes. c. The ruling examines whether various employer-provided transportation benefits (e.g., smartcards, debit cards, and cash reimbursement arrangements) qualify as "qualified transportation fringes" under Section 132 of the IRC and if the benefits can be excluded from gross income and wages. Eight scenarios (Situations 1–8) consider different arrangements of transportation benefits. d. The primary issues involve: •Whether employer-provided transportation benefits (via electronic media like smartcards or debit cards) qualify for exclusion from gross income. •Whether specific arrangements (e.g., cash reimbursements, delivery charges) comply with the bona fide reimbursement requirements of Section 132(f). •Whether technological restrictions on debit cards ensure compliance with the qualified transportation fringe benefit rules. e. The IRS concluded the following for key situations: •Benefits provided through compliant smartcards, terminal-restricted debit cards, and properly substantiated MCC-restricted debit cards qualify for exclusion under Section 132(a)(5). •Benefits using MCC-restricted debit cards without proper substantiation or with funds used for both transit and non-transit purposes do not qualify for exclusion. •Cash reimbursement arrangements for transit benefits will no longer qualify after December 31, 2015, if terminal-restricted debit cards are readily available. f. Unable to access the FTC Ruling
g. Yes, Revenue Ruling 2014-32 incorporated the scenarios from Rev. Rul. 2006-57 and superseded it. •Rev. Rul. 2006-57 initially allowed cash reimbursements for transit benefits when terminal-restricted debit cards were unavailable. •Rev. Rul. 2014-32 concluded that terminal-restricted debit cards are now widely available, and cash reimbursements for transit benefits are disallowed starting January 1, 2016, in areas where such cards are accessible. Exercise 7 a. Citation: Rev. Proc. 2018-59, 2018-50 I.R.B. 1016 b. The procedure discusses the following sections: •Section 163(j): Limitation on the deduction of business interest expense.•Section 163(j)(7)(B): Definition and treatment of "electing real property trade or business."•Section 469(c)(7)(C): Defines a "real property trade or business."•Section 168(g)(1)(F): Requires electing real property trade or businesses to use the alternative depreciation system.•Section 168(g)(8): Description of property subject to the alternative depreciation system. c. The IRS established a safe harbor allowing taxpayers with certain infrastructure trades or businesses to qualify as "electing real property trade or business" under Section 163(j)(7)(B). The safe harbor ensures that infrastructure-related activities (e.g., designing, building, managing, and operating infrastructure) can be treated as real property trades or businesses, exempting them from the business interest expense deduction limitation under Section 163(j). d. Unable to access the FTC Ruling e. The judicial history reflects that this revenue procedure applies to taxable years beginning after December 31, 2017, and has been effective since December 10, 2018. It does not directly involve court rulings but instead provides administrative guidance and interpretation for the application of Section 163(j) under the Tax Cuts and Jobs Act (TCJA).