American Recovery and Reinvestment Act of 2009 (Section 1151)

Implementation Guidance Regarding Section 1151 of the American Recovery and Reinvestment Act of 2009

“Increased Exclusion Amount for Commuter Transit Benefits and Transit Passes”

1. Section 1151 of The American Recovery and Reinvestment Act of 2009 (ARRA) increased the transit benefit amount from $120 (as amended by IRS revenue procedures) to $230 per month. The language reads :

SEC. 1151. INCREASED EXCLUSION AMOUNT FOR COMMUTER TRANSIT BENEFITS AND TRANSIT PASSES.

(a) IN GENERAL.—Paragraph (2) of section 132(f) is amended by adding at the end the following flush sentence:

"In the case of any month beginning on or after the date of the enactment of this sentence and 
before January 1, 2011, subparagraph (A) shall be applied as if the dollar amount therein were 
the same as the dollar amount in effect for such month under subparagraph (B)."

(b) EFFECTIVE DATE.—The amendment made by this section shall apply to months beginning on or after the date of the enactment of this section.

2. The IRS views the provision as self-executing, so that starting on any month beginning after the date of enactment of the Act (February 17, 2009), e.g. on March 1, any individual that received such a benefit from their employer may claim the increased exemption amount. The IRS need not take any further action to effect the benefit. The IRS confirmed that the new exemption amount for the qualified transportation fringe benefit for a transit pass is $230.

The IRS also confirmed that the January 1, 2011 date in the Act is a sunset date for the increased benefit. Thus, unless Congress affirmatively acts to extend the increase to amounts paid on or after January 1, 2011, then the increase will no longer apply and employees must again use the lesser exemption amount for mass transit.

The increased benefit provided by DOT is only for use on mass transit and may not be used to pay for parking at metro or mass transit facilities.

3. Section 2 of Executive Order 13150, incorporated into statute by section 3049 of SAFETEA-LU (5 U.S.C. 7905 note), requires that Federal agencies within the National Capitol Region implement a “‘transit pass’ transportation fringe benefit program” for benefits up to the maximum authorized by 26 U.S.C. § 132(f)(2). As noted above, ARRA raised this maximum benefit level to $230. The requirements of Executive Order 13150 regarding transit passes pertain only to Federal agencies within the National Capitol Region (“ the District of Columbia; Montgomery, Prince George’s, and Frederick Counties in Maryland; Arlington, Fairfax, Loudon, and Prince William Counties in Virginia; and all cities now or hereafter existing in Maryland or Virginia within the geographic area bounded by the outer boundaries of the combined area of said counties.”).