The Internal Revenue Service issued proposed regulations that provide guidance for the deduction of qualified transportation fringe and commuting expenses.

The Tax Cuts and Jobs Act (TCJA) does not allow deductions for qualified transportation fringe (QTF) expenses and does not allow deductions for certain expenses of transportation and commuting between an employee’s residence and place of employment.

The law also provided that a tax-exempt organization’s unrelated business taxable income is increased by the amount of the QTF expense that is nondeductible. However, on December 20, 2019, this was repealed as part of the Further Consolidated Appropriations Act of 2020. This repeal was retroactive to the original date of enactment by the TCJA.

These proposed regulations specifically address the elimination of the deduction for expenses related to QTFs provided to an employee of the taxpayer. The proposed regulations also provide guidance and methodologies to determine the amount of QTF parking expense that is nondeductible.

The guidance also includes definitions and special rules to clarify and simplify the calculations underlying the methodologies.

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IR-2020-125