Qualified transportation fringe benefits, which are not taxable to the employees but are deductible by you, are the following employee benefits:
For qualified transportation fringe benefit purposes, an employee is any common-law employee or other statutory employee; for example, officers of corporations are included. However, self-employed individuals (including partners, two percent shareholders in S corporations, sole proprietors, and other independent contractors) are not employees for purposes of this fringe benefit.
If you provide a qualified transportation fringe benefit to an employee in place of compensation, you can't exclude the amount from the employee's income, except in the case of qualified parking. Amazingly, this is true even if your state or local laws require you to offer your employees a choice of receiving the benefit or higher compensation.
You should also note that you can't exclude a qualified transportation fringe benefit under the minimal or working condition fringe benefit rules — except, if you provide a local transportation benefit other than by transit pass or commuter highway vehicle, or to a person who is not considered an "employee" for purposes of the transportation benefit. In that case, you may be able to exclude all or part of the benefit under the other fringe benefit rules.
Finally, there are limitations on the amount you can exclude from your employee's wages for qualified transportation fringe benefits. For 2002, you may exclude up to $100 a month for combined commuter highway vehicle transportation (van pools) and transit passes. The amount is $65 for 2001 and is adjusted periodically for inflation. You may exclude $185 a month for qualified parking in 2002 (the amount is $180 for 2001 and is adjusted periodically for inflation). If the fair market value of a benefit is more than its limit for any month, only the amount in excess of the limit, minus any amount paid for the benefit by or for the employee, is included in the employee's gross income.