New D.C. Law Requires Employee Transportation Benefit to Reduce Private-Vehicle Commuting

May 20, 2020

On April 27, 2020, the District of Columbia enacted the D.C. Transportation Benefits Equity Amendment Act of 2020. The new law requires certain D.C. employers to reduce the number of employees who commute into the city by private vehicle. These measures include: (1) providing mass transportation for employees directly; (2) giving employees a transit pass (including passes for travel by bus, streetcar, Metro, Maryland Area Regional Commuter, Virginia Railway Express or Amtrak); or (3) reimbursing employees for the purchase, maintenance and storage of a bicycle. Alternatively, employers can pay a $100 fee per employee per month or develop a transportation demand management plan.

Important aspects of the new law are described below.

Covered Employers. The law only affects employers who offer a “parking benefit” in D.C. to an employee. A “parking benefit” means the following, for which the employee pays nothing or less than market value: (1) parking in D.C. at or within one-half mile of the business; or (2) compensation, either directly or through an employer subsidy, to park on or near the business premises.

Exemptions. This new law does not apply to employers who own the parking spaces used by employees so long as the employer owned the space on the date the new law takes effect and continues to own the space thereafter. The law does apply if the employer leases the parking spot used by the employee.

Provide the Benefit, Pay the Fee or Develop a Plan. Employers who offer a parking benefit will need to: (1) offer a clean-air transportation fringe benefit, (2) pay a fee or (3) develop a transportation demand management plan.

  • Offer a Clean-Air Transportation Fringe Benefit. Employers may offer employees a clean-air transportation fringe benefit in an amount equal to or greater than the monthly market value of the parking benefit. A clean-air transportation fringe benefit means the following benefits provided in addition to the employee’s compensation: (1) transportation in a “commuter highway vehicle” between the employee’s residence and place of employment; (2) a “transit pass” to pay for transportation via mass transit; or (3) a qualified bicycle commuting reimbursement (as all of these terms are defined under federal law). Employees are not required to accept the clean-air transportation fringe benefit unless the employee has declined the parking benefit the employer has offered. The value of a clean-air transportation fringe benefit other than a qualified bicycle commuting reimbursement would not be taxable to the employee up to the 26 U.S.C. § 132 limits (assuming it qualified under the applicable Section 132 requirements) and would not be deductible by the employer. Any qualified bicycle commuting reimbursement would be taxable to the employee and deductible by the employer.
  • Pay the Fee. Employers may opt to pay a “Clean Air Compliance” fee of $100 per month for each employee who is offered a parking benefit.
  • Develop a Transportation Demand Management Plan. An employer who opts to implement a transportation demand management plan must submit to the D.C. Department of Transportation a plan to reduce, by 10 percent from the previous year, the number of commuter trips employees make by car, until 25 percent or less of employees’ commuter trips are made by car. The Department of Transportation will provide a form for this plan. The plan is subject to approval by the D.C. Department of Transportation and compliance checks.

Additional Employee Compensation. An employee who accepts a clean-air transportation fringe benefit must estimate the amount of the benefit the employee will use each month. If the employee’s estimate is less than the value of the offered clean-air transportation fringe benefit, the employer must pay the difference to the employee. The employee may amend the estimate up to once every 12 months. The Department of Transportation is expected to provide additional guidance for the form that this estimate will take.

Regular Reports. All covered employers must submit a report to the mayor every two years that includes: (1) the total number of employees; and (2) the number of employees (a) offered a parking benefit, (b) using a parking benefit, (c) offered a clean-air transportation fringe benefit and (d) using a clean-air transportation fringe benefit.

Effective Date. The law will not go into effect until its fiscal effect is included in an approved budget and financial plan. The next regular budget cycle will occur in 2021 for fiscal year 2022. Until funding is provided, this law is considered unfunded and, therefore, not in effect.

Aug. 31, 2020 Update: The condition that the law be subject to appropriations was repealed on August 31, 2020 by Act 23-407.  Accordingly, the law will go into effect after Act 23-407 undergoes a 60-day period of congressional review.

In advance of the new law’s inclusion in the city budget, D.C. employers should determine if they will be affected by the law and, if so, how they may choose to proceed with their various options. For help with this analysis or for additional information about commuter benefit laws in D.C., contact the authors of this article or another member of the McGuireWoods labor and employment team.