Comments Concerning Proposed Regulation on Qualified Transportation
Fringe Benefits under Internal Revenue Code Section 132(F)

V.  Effective Date and Transition Relief

The Proposed Regulation provides no effective date, nor any provision indicating whether employers may rely on the Proposed Regulation as a good faith interpretation of the law. In the absence of specific regulatory guidance prior to the Proposed Regulation, many employers across the country have implemented and administered salary reduction transportation plans in good faith by making reasonable interpretation of the statutory requirements under section 132(f) and IRS Notice 94-3, but have used rules that would be prohibited under the Proposed Regulation.

We request that the final regulation in this area take this good faith compliance effort into consideration and that any affirmative compliance requirements for salary reduction transportation benefit arrangements apply on a prospective basis. We further request that the final regulation take into account the difficulties employers will have in implementing any new requirements for salary reduction transportation benefit programs, and thus the time needed to modify existing programs, in determining an appropriate effective date for guidance in this area. We request retroactive relief where appropriate to reflect the effective date of the changes to section 132(f). We also request transitional relief from any income or employment tax consequences for the employers (and their employees) who implemented transportation benefit plans prior to the issuance of the final regulation. Accordingly, we recommend that the final regulation provide that the final rules take effect as of the first day of the calendar year commencing at least twelve months after the date the final regulation is issued.