Parking Cash-Out Subsidy

Date of Publication: March 9, 2010


Existing law requires certain California employers which provide subsidized parking for their employees to offer its employees a cash allowance in lieu of a parking space. As of January 1, 2010, employers subject to the Parking Cash-Out Subsidy employers may be assessed a civil penalty for violating this requirement.

Employers Subject to the Parking Cash-Out Subsidy

An employer who meets all the below criteria must offer a parking cash-out program:

  • The employer employs fifty or more employees (at one or more worksites);
  • The employer provides its employees with a partial or full parking subsidy;
  • The employer subsidizes any employee parking on property that the employer does not own;
  • The employer can calculate the out-of-pocket expense of the parking subsidies;
  • The employer can reduce, without penalty, the number of paid parking spaces it maintains for the use of employees (the parking costs are separated in the lease agreement and/or the employer claimed parking as a separate itemized business expense on state or federal tax returns); and
  • Any worksite is located in an air basin designated as a nonattainment area for any state air quality standard.

Nonattainment Areas

All of Southern California and much of Central and Northern California are currently designated as nonattainment areas regarding its air quality. Please see the Air Resources Board website at http://www.arb.ca.gov/homepage.htm to determine if any worksite is located in an air basin designated as a nonattainment area.

Employee Eligibility and the Amount of the Subsidy

An employee who uses or could use a subsidized parking space (whether assigned or unassigned) must be offered the cash-out allowance.

Employees who are current carpoolers, vanpoolers, transit users, telecommuters, walkers, or bikers are eligible for the parking cash-out if a qualifying subsidized parking space for a single-occupancy vehicle is currently available to him/her. Please note that carpool and vanpool spaces are not subject to the cash-out.

The cash allowance is equivalent to the parking subsidy that the employer would otherwise pay to provide the employee with a parking space. The parking subsidy is the difference between the out-of-pocket amount paid by the employer and the charge, if any, to an employee for use of that space. So, if an employer pays $100 per month to provide an employee with a parking space and charges an employee $20 per month for that parking space, the subsidy would be $80. An employee’s eligibility changes with his/her parking circumstances. For instance, if an employee changes worksites and goes from a subsidized leased parking space to one that is not eligible (e.g., a space owned by the employer), the employer is no longer required to offer the employee a cash allowance.

An employer which reimburses its employees for commute-related parking costs must offer this subsidy if the parking costs are reimbursed on a regular basis. Commute-related subsidies (e.g., transit passes, ridesharing allowances) may be deducted from the cost of the parking in determining the amount of the cash allowance. For instance, if the employee does not use the parking space, which costs $65 per month, and receives a $50 transit pass (subsidy) each month, the cash allowance is $15 per month.

Additionally, an employer which has worksites with different leased parking rates may average the cost per space. The cash allowance would change over time based to reflect the average cost of subsidized parking.

Tax Implications

This cash allowance is considered taxable income to the employees, meaning it is included in the employee’s gross income subject to state income and payroll taxes (except for any portion used for ridesharing purposes). Ridesharing subsidies are exempt from state income taxes and some transit or vanpool subsidies are exempt from federal income taxes. The employer may deduct the costs related to this cash-out program as a business expense.

Guidelines

The employer may establish reasonable policies for administering this benefits, such as quarterly or semi-annual review, enabling an eligible employees to switch between the subsidized parking or cash out.

An employer subject to the Parking Cash-Out program may require its employee participants to certify that they will comply with guidelines established by the employer designed to avoid neighborhood parking problems, with a provision that an employee who does not comply with the guidelines will no longer be eligible for the parking cash-out program.

Penalties

Effective January 1, 2010, an employer could be assessed a civil penalty for failure to adhere to these requirements by the State Air Resources Board, not to exceed $500 per vehicle in a parking space subject to the cash-out program. Alternatively, the city, county, or air district could impose a civil penalty.

To Do

  • 1. Determine which employee parking is subject to the cash-out;
  • 2. Determine which employees are eligible for the program;
  • 3. Calculate the appropriate cash allowance for each eligible employee;
  • 4. Inform eligible employees; and
  • 5. Administer the program

Additional Considerations

Most bargaining agreements will require employers to meet and confer with the union regarding cash-out implementation.

An employer may discontinue parking subsidies, which may have the same impact on reducing solo driving as providing a cash allowance. Some employers may slightly decrease the parking subsidy to help defray the costs of the parking cash-out program.

An employer may implement the parking cash-out program as a commute benefits program, providing all employees with a choice as to how to use the commute subsidy.

Two employees may carpool and cash-out one parking space or use alternate commute modes to share the use or a parking space.

For Additional Information

For additional information on the Parking Cash-Out Program, please visit the following web pages or call Dennis Wade at 916-327-2963.

http://www.arb.ca.gov/planning/tsaq/cashout/cashout_guide_0809.pdf

http://www.arb.ca.gov/planning/tsaq/cashout/cashout.htm

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