Internal Revenue Code section 132(a)

Internal Revenue Code Section 132(a) provides eight types of fringe benefits that are excluded from gross income. These include fringe benefits which qualify as a (1) no-additional-cost service, (2) qualified employee discount, (3) working condition fringe, (4) de minimis fringe, (5) qualified transportation fringe, (6) qualified moving expense reimbursement, (7) qualified retirement planning services, or (8) qualified military base realignment and closure fringe.

Fringe benefits excluded from gross income

No-Additional-Cost Service

A No-Additional-Cost Service is defined in Section 132(b) as any service provided by an employer to an employee if (1) the service is offered for sale to customers in the ordinary course of the employer's business and (2) the employer incurs no substantial additional cost in providing the service to the employee.

Qualified Employee Discount

A Qualified Employee Discount is defined in Section 132(c) as any employee discount with respect to qualified property or services to the extent the discount does not exceed (a) the gross profit percentage of the price at which the property is being offered by the employer to customers, in the case of property, or (b) 20% of the price offered for services by the employer to customers, in the case of services.

Working Condition Fringe

Working Condition Fringe is defined in Section 132(d) as any property or services provided to an employee so that the employee is able to perform her job. Examples include a company car for business travel, a cell phone provided primarily for business purposes, and job-related education.

De Minimis Fringe

De Minimis Fringe is defined in Section 132(e)(1) as any property or service given to an employee by the employer which is, after taking into account the frequency provided, whose value is so small as to make accounting for it unreasonable or administratively impracticable. Examples of de minimus fringe includes personal use of an employer-provided cell phone provided primarily for business purposes; occasional personal use of the employer's copier; holiday gifts, other than cash or gift cards, with a low fair-market value; occasional parties or picnics for employees and their guests; occasional tickets for theater or sporting events.

Under Section 1.132-6(b)(1) of the Treasury Regulations, all similar fringes must be considered together to determine whether they are de minimus. One free meal given to all employees once a year would qualify because the meals are infrequently provided. One free meal provided to a different employee each week throughout the year would not qualify.

Under Section 1.132-6(c) of the Treasury Regulations, cash and gifts cards never qualify as a de minimum fringe. Cash provided to an employee so the employee may buy a theater ticket does not qualify. It would qualify, however, if the employer purchases the theater ticket and provides the theater ticket to the employee.

Qualified Transportation Fringe

Qualified transportation fringe is defined in Section 132(f) as (1)(A) transportation in a commuter highway vehicle between the employee's residence and place of employment, (B) any transit pass, or (C) qualified parking, if provided by an employer to an employee. A bicycle commuter benefit will be available beginning in 2009.

Qualified Moving Expense Reimbursement

Qualified Moving Expense Reimbursement is defined in Section 132(g) as any amount received by an individual from an employer as payment for expenses that would be deductible as moving expenses under Section 217 if paid by the individual.

Qualified Retirement Planning Services

Qualified Retirement Planning Services is defined in Section 132(m) as retirement planning advice or information provided to an employee and spouse by an employer maintaining a qualified employer plan.

Qualified Military Base Realignment and Closure Fringe

Qualified Military Base Realignment and Closure Fringe is defined in Section 132(n) as one or more payments under Section 1013 of the Demonstration Cities and Metropolitan Development Act of 1966 to offset the adverse effects on housing values from military base realignment or closure.

Other statutory fringe benefits

Other fringe benefits may be excluded from taxable income under other sections of the Internal Revenue Code.

Many qualified retirement plans are governed under Section 401, 403, or 457.

Section 74(c) excludes "employee achievement awards" for length of service or safety achievements.

Section 79 excludes group term life insurance benefits provided by an employer.

Section 106(a) excludes accident and health insurance coverage provided by an employer.

See also

• Donaldson, Samuel A., Federal Income Taxation of Individuals: Cases, Problems and Materials, 90, 92 (2nd. Ed. 2007).