26 U.S.C. § 132 — Certain fringe benefits

(a) Exclusion from income. An employee's gross income doesn't include a fringe benefit if it qualifies as one of these: (1) a no-additional-cost service; (2) a qualified employee discount; (3) a working condition fringe; (4) a de minimis fringe; (5) a qualified transportation fringe; (6) a qualified moving expense reimbursement; (7) qualified retirement planning services; or (8) a qualified military base realignment and closure fringe. (b) No-additional-cost service. This is a service the employer gives an employee to use, when (1) the employer normally sells that same service to customers in the line of business where the employee works, and (2) giving it to the employee costs the employer no real extra money — including money the employer doesn't make because it gave the service away instead of selling it — not counting anything the employee pays for it. (c) Qualified employee discount. (1) This is a discount on qualifying property or services that doesn't go over a limit: (A) for property, the limit is the employer's "gross profit percentage" on what it charges customers; (B) for services, the limit is 20 percent of what the employer charges customers. (2) "Gross profit percentage" means: (A) take the employer's total sales price for the property sold to customers, subtract the employer's total cost for that property, then divide by the total sales price. (B) This percentage is figured using all the property the employer offers customers in that line of business (or a reasonable grouping of that property), based on the employer's actual experience over a representative period. (3) "Employee discount" means the amount by which the price offered to the employee is lower than the price offered to customers. (4) "Qualified property or services" means property (other than real estate, or personal property held for investment) or services that the employer normally sells to customers in that line of business. (d) Working condition fringe. This means property or services given to an employee that the employee could have deducted as a business expense under section 162 or 167 if the employee had paid for it themselves. (e) De minimis fringe. (1) This is any property or service so small in value — considering how often the employer gives similar perks to its employees — that accounting for it isn't worth the trouble. (2) An employer-run eating facility for employees counts as a de minimis fringe if (A) it's located on or near the employer's business premises, and (B) the money it brings in normally covers or exceeds its direct operating costs. This rule only helps a highly compensated employee if the facility is open, on the same terms, to a reasonably defined group of employees that doesn't favor highly compensated employees. For measuring whether revenue covers costs, an employee who's allowed to exclude a meal's value under section 119 is treated as if they paid the facility's direct operating cost for that meal. (f) Qualified transportation fringe. (1) This means any of: (A) transportation in a commuter highway vehicle between home and work; (B) any transit pass; or (C) qualified parking. (2) Dollar cap: the tax-free amount can't exceed $175 a month for the combination of (A) and (B) together, and separately $175 a month for qualified parking. (3) A cash reimbursement from the employer for one of these benefits also qualifies — but a cash reimbursement for a transit pass only counts if no voucher or similar item that can be exchanged only for a transit pass is readily available for the employer to hand out directly. (4) Letting an employee choose between one of these benefits and taxable pay doesn't, by itself, make that amount taxable. (5) Definitions: a "transit pass" is a pass, token, farecard, voucher, or similar item for transportation (or reduced-price transportation) on mass transit, public or private, or from a business that transports people for pay in a vehicle meeting the "commuter highway vehicle" definition below. A "commuter highway vehicle" is a highway vehicle that (i) seats at least 6 adults besides the driver, and (ii) is expected to be used at least 80 percent of its mileage (I) to carry employees between home and work, and (II) on trips where at least half the seats, not counting the driver, are filled with employees for that purpose. "Qualified parking" is parking near the employer's business, or near where the employee catches transportation described above — transit, a commuter vehicle, or a carpool — to get to work, but not parking near the employee's own home. Transportation counts as "provided by the employer" if it's in a commuter highway vehicle the employer operates or arranges to have operated. "Employee" here does not include a self-employed person under section 401(c)(1). (6) Inflation adjustment: (A) for tax years starting after 1999, the $175 limits go up each year, using a cost-of-living formula that swaps in "1997" for "2016." (B) If the increase isn't a multiple of $5, it's rounded down to the next $5. (7) These transportation benefits don't also count as "working condition" or "de minimis" fringes. (g) Qualified moving expense reimbursement. (1) This means any amount an employer pays or reimburses an employee for moving costs that would have been deductible under section 217 if the employee had paid them directly — but not costs the employee already deducted in an earlier year. (2) Suspended for tax years after 2017: this exclusion doesn't apply for tax years starting after December 31, 2017, except for an active-duty service member moving under military orders for a permanent change of station, or an intelligence-community employee or new hire (as the National Security Act defines that term) who moves because of a required reassignment. (h) Who counts as an "employee" for the no-additional-cost-service and discount rules in (a)(1) and (2). (1) It includes a retired or disabled former employee of that line of business, and the widow or widower of an employee who died while working there or while retired or disabled. (2) A spouse's or dependent child's use counts as the employee's own use. A "dependent child" is a child, as section 152(f)(1) defines it, who is the employee's dependent, or whose parents have both died and who hasn't turned 25; a child covered by section 152(e) counts as a dependent of both parents for this purpose. (3) For air transportation specifically, use by an employee's parent also counts as use by the employee. (i) Reciprocal agreements. A service one employer gives to another employer's employee counts as if that employee's own employer gave it, if (1) a written agreement between the two employers covers it, and (2) neither employer incurs substantial extra cost, including lost revenue, providing it. (j) Special rules. (1) The no-additional-cost-service and discount exclusions only apply to a highly compensated employee if the benefit is available on the same terms to a reasonably defined group of employees that doesn't favor highly paid staff. (2) For a leased department-store section: (A) it's treated as part of the store operator's line of business, and its employees are treated as the store operator's employees, for the discount rule; (B) a "leased section" is one where, because of a lease or similar arrangement, the public would think the people selling there work for the store operator. (3) Auto salesmen: (A) a "qualified automobile demonstration use" is treated as a working condition fringe; (B) that means a full-time car salesperson using a car in the dealer's sales area, mainly to help do their job, with real limits on personal use. (4) On-premises gyms: (A) the value of an on-site athletic facility the employer provides isn't taxed; (B) that means a gym or athletic facility that (i) sits on the employer's premises, (ii) the employer runs, and (iii) is used almost entirely by the employer's employees, spouses, and dependent children. (5) Airline affiliates: (A) if a "qualified affiliate" belongs to the same corporate group as an airline, and its employees doing airline-related work get no-additional-cost air travel through that airline, the affiliate is treated as being in the same line of business as the airline for that benefit; (B) a "qualified affiliate" is a corporation mostly engaged in airline-related services; (C) "airline-related services" means catering, baggage handling, ticketing and reservations, flight planning and weather analysis, airport restaurants and gift shops, and similar services the Secretary names; (D) "affiliated group" has the meaning given in section 1504(a). (6) "Highly compensated employee" has the meaning given in section 414(q). (7) For qualified transportation fringes, air cargo transport and air passenger transport count as the same kind of service. (8) Education or training benefits that are taxable, and that don't qualify to be excluded under section 127, are still excluded here, but only if they count as a working condition fringe. (k) Customers don't include employees. Everywhere in this section — except in subsection (c)(2) — "customers" means only people who are not employees. (l) This section doesn't apply where another rule already covers a benefit. This section — except subsections (e) and (g) — doesn't apply to a fringe benefit if its tax treatment is specifically covered by some other section of this chapter. (m) Qualified retirement planning services. (1) This means retirement planning advice or information an employer gives to an employee and the employee's spouse, if the employer maintains a qualified employer retirement plan. (2) For highly compensated employees, the exclusion in (a)(7) only applies if the same services are available on the same terms to everyone normally offered education or information about the employer's plan. (3) A "qualified employer plan" is a plan, contract, pension, or account described in section 219(g)(5). (n) Qualified military base realignment and closure fringe. (1) This means one or more payments made under section 1013 of the Demonstration Cities and Metropolitan Development Act of 1966, as that section stood on the date the American Recovery and Reinvestment Tax Act of 2009 was enacted. (2) Limit: for any one property, this doesn't cover payments once their total goes over the maximum amount that section 1013 allowed, as it stood on that same date. (o) Regulations. The Secretary must prescribe whatever regulations are necessary or appropriate to carry out this section.