Fringe benefits are additional employee benefits offered as compensation above the salary stipulated for additional services rendered or employee performance. Some fringe benefits like health insurance or social security are required by the law and, therefore, taxable. In contrast, others are offered by employers voluntarily and may be exempted from taxation, as stated by the law. The seven major types of fringe benefits include Working-Condition-Fringe, qualified transportation fringe, qualified retirement planning services, De Minimis fringe, Qualified Employee Discount, No-Additional-Cost Service, and Qualified Moving Expense Reimbursement. According to the working Section 132 of the US IRC (Internal Revenue Code) specifies that such benefits are exempted from taxation in the gross income (Kagan, 2020).
The main reason for the qualified transportation fringe benefits is to create a tax relief effect and ensure that individuals are not subjected to heavy taxation on parking fees. In this benefit, there is the limited exclusion of parking fees and no employer deduction on the net cost. The qualified transportation fringe benefits may be available to the spouses, dependents, retirees, and employees only.
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For qualified transportation benefits, discrimination is allowed relative to the transportation needs of individual employees. Discrimination is defined in terms of the eligibility test of an individual to be highly or less compensated. The discrimination rule is set in qualified transportation fringe on the basis that the transportation, tokens, and parking needs of employees differ. If the employer's plan is discriminatory, there would be discrimination against low profile workers where they would be subjected to more taxation. In comparison, high profile workers would be subjected to less taxation. Eventually, there is taxation inequality as the low profile workers bear the overall tax burden. However, in the qualified transportation fringe, the needs and requirements of employees differ. The fringe discriminatory nature helps in ensuring there is a balance between worker profile and worker compensation.
References
Kagan, J. (2020, July 19). Fringe Benefits: The Ins and Outs . https://www.investopedia.com/terms/f/fringe-benefits.asp.
