80/50 Rule Update For Employee and Employer Operated Van Pools During COVID-19

On December 3, 2020, the Internal Revenue Service published on its website Frequently Asked Question about COVID Relief for Van Pools. IRS stated that if, at the beginning of the 2020 calendar year, the employer reasonably expected that at least 80% of the vehicle's mileage for the year would be used to transport employees from their residence to their place of employment, and the number of employees transported would be at least 50% of the adult seating capacity, but due to the COVID-19 emergency, those requirements cannot be met, the vanpool would still be considered to meet the 80/50 rule and the definition of a “commuter highway vehicle” under 26 U.S.C. 132(f), so long as the vehicle can seat six adults not including the driver. However, once the COVID-19 pandemic has ended, employee and employer operated vanpools must again comply with the standard requirements of the 80/50 rule.

IRS regulations provide that an employer must have a reasonable expectation that a vanpool will meet the definition of “commuter highway vehicle” for the year in order to satisfy the 80/50 rule for that year.  Thus, for the calendar year of 2021, employers that have a reasonable expectation that a vanpool will satisfy the 80/50 rule for 2021 will be considered to meet the 80/50 rule and the definition of a “commuter highway vehicle” under 26 U.S.C. 132(f).

It is at the discretion of each Federal agency to implement this interpretation of the 80/50 rule limited to the COVID-19 public health emergency. To reduce the risk of fraudulent activity related to the 80/50 rule, the Transit Benefit Policy Office is providing the following recommendations for maintaining your transit benefit internal controls related to vanpool participants.

For new and existing vanpool participants, the Transit Benefit Policy Office and the Executive Agent recommends that you (1) verify that your vanpool participants are commuting in a vehicle that can seat six passengers, excluding the driver (2) verify that more than one person is commuting in the vanpool on a daily basis, and (3) review the frequency that vanpool participants recertify for their benefit during the COVID-19 public health emergency. As always, we encourage agencies to review and adhere to the Minimum Internal Controls for Vanpools

Federal Agencies can implement additional controls and reporting requirements needed to meet their agency's unique program criteria. Please let us know what other controls you implement so we can share that information with the transit benefit community.