The reporting requirements of the Law may impact many DC employers who offer free or subsidized parking to its employees as the first compliance reporting is due on January 15, 2023.
What is the Objective of the New Law?
The Mayor of District of Columbia (“D.C.”, “DC” or the “District”) signed Transportation Benefits Equity Amendment Act of 2020 (D.C. Act 23-305, the “Act”) in April 2020 and the Act became law, commonly referred to as DC Parking Cash Out Law (the “Law”) on June 24, 2020. The Law intends to reduce traffic congestion and improve air quality in DC and decrease solo commutes using personal or for-hire vehicles. It encourages employees to use sustainable transportation methods by exchanging their parking benefits with transit benefits or cash. It also imposes reporting requirements to DC employers and may have them pay a compliance fee of $100/month per employee if they prefer to continue offering free or subsidized parking benefits.
Does the Law Apply to My Organization?
If your organization meets the following criteria, then it is required to comply and report its compliance with the Law to District Department of Transportation (“DDOT”) every two years:
- It operates an office in the District (“DC Employer”); and
- It employs 20 or more covered employees (defined later); and
- It offers free or subsidized parking to some or all its employees.
If your organization meets the first two criteria above, it is considered a covered employer (i.e., it is within the scope of the Law) and is subject to the Law’s reporting requirements, even if it doesn’t offer free or subsidized parking to any of its employees. Thus, all DC Employers with 20 or more employees are recommended to review the Law and identify if it applies to them. If you determine that you are a covered employer but don’t offer free or subsidized parking, you are required to report your exemption to DDOT biennially.
There are certain other cases where DC Employers are considered to have an exemption, but again, with the requirement to report it every 2 years:
- Employers that owned their parking before October 1, 2020; and will continue to own after that.
- Employers that are under a current parking lease agreement that began before October 1, 2020. They are exempt from the Law until the lease term is up. Their exempt status ceases once the lease term ends. Any lease extensions after the end date will not extend their exempt status.
- Hospitals and Universities with pre-existing Campus Plans. Once their Campus Plans expire, hospitals and universities will be required to comply with the Law or report their exemption by way of not offering free or subsidized parking if they choose to do so. Also, if they start to build outside the existing Campus Plan, such construction must comply with the Law.
Exemptions relieve DC Employers of compliance, but not of the reporting requirement. Thus, it is important to review the reporting requirements and deadlines even if you don’t offer free or subsidized parking.
How Does the Law Define Covered Employee and Parking Benefits?
An employee is considered covered employee under the Law if he/she/they meet the following criteria:
- Employee is a full-time or part-time employee, and
- Employee works in employer’s office in the District (i.e., performs 100% of work), or
- Employee performs 50% of work in the District, including working from residences, or
- Employee’s employment is based in the District and employee performs substantial amount of work in the District and less than 50% of work in any other state.
Employees who telework 50% or less of their time and perform 50% or more of their work in employer’s District office or telework more than 50% of their time and reside in the District are also considered covered employees. If they telework more than 50% of their time and reside outside the District, for instance in Maryland or Virginia, they are not covered employees.
Also, your organization’s employee and covered employee count may differ. For instance, you may be a DC Employer with 24 employees, but due to certain employees teleworking from other states where they perform more than 50% of their work there, your covered employee count may be 18 and accordingly, your organization will be out of the Law’s scope.
Whether an employee accepted or declined free or subsidized parking benefit you offered as an employer is not a factor in determining the number of covered employees. Also, only the covered employees are entitled to the new benefits offered in the Law.
Within the Law, Parking benefit is defined as personal motor vehicle parking, on or within half mile of the business premises and located in the District, which is offered to the employee, in addition to compensation, directly by the employer or through an employer subsidy on or near the business premises, for which the employee pays less than market value or nothing. If employee’s use of personal motor vehicle is a requirement for regular performance of the work, the parking offered is not a parking benefit.
When Does My Organization Need to Take No Action Regarding the Law?
Your organization is not within the scope of the Law and therefore needs to take no action, if:
- It has less than 20 covered employees, (i.e., it is not a covered employer); or
- It does not employ any employees or have any offices in the District.
Even if your organization offers free or subsidized parking benefits as a DC Employer, if your covered employee count is less than 20, you are not required to take any action.
My Organization is a Covered DC Employer. How Do I Comply with the Law?
If you have determined that your organization has more than 20 covered employees, and none of the exemptions defined earlier apply to you, there are three options available to comply with the Law:
- Offer Clean Air Transportation Fringe Benefit (i.e., “Parking Cash Out”)
- Implement a Transportation Demand Management (TDM) Plan
- Pay Clear Air Compliance Fee
In addition to any compliance option selected, your organization is required to report your compliance to DDOT every two years.
Offer Clean Air Transportation Fringe Benefit
This option requires your organization to offer Clean Air Transportation Fringe Benefit, also known as Parking Cash Out, in an amount equal to or greater than the monthly market value of parking benefit offered to the employees. Essentially, covered employees will trade their parking space with a monetary compensation.
This benefit complies with Section 132 of the Internal Revenue Code and can be in the form of (a) transportation in a commuter highway vehicle, (b) any transit pass, or (c) any qualified bicycle commuting reimbursement.
Each employee who accepts Parking Cash Out should fill out a worksheet showing the monthly amount of transit or vanpool subsidy they will need and submit to the employer. If their monthly subsidy need is less than the market value of parking space, the employer must pay the difference to the employee in the form of additional compensation, increased contribution in employee’s health coverage, or a combination of both.
If the employee accepts the benefit but reports their monthly need as zero (i.e., teleworkers), the entire market value of the parking space must be paid to the employee.
The market value of the parking space is the minimum value when determining the amount of this benefit. DC Employers can calculate the market value by taking median of the publicly available parking rates within a quarter mile of their offices. The distance can be expanded to a half mile if there are no parking facilities within a quarter mile. If there are none in a half mile, $175 per month can be used as the market value.
Employees must decline free or subsidized parking benefit before accepting Clean Air Transportation Fringe Benefit offered by the employer. They can’t receive both benefits at the same time.
Employees are notified by the employer about this new benefit, and they need to fill out the DDOT provided worksheet indicating whether they accept or decline the benefit, and if they accept, the monthly amount they need for commuting to the employer’s offices. Employers will then provide the benefit as any other commuter benefits, and if the employee’s monthly need is less than the market value, will pay the difference as additional compensation.
Implement a Transportation Demand Management (TDM) Plan
DC Employers who don’t want to offer Clean Air Transportation Fringe Benefit, can submit a Transportation Demand Management plan to DDOT to comply with the Law. The format of the plan is provided by DDOT.
The TDM plan essentially outlines your organization’s strategies and timeline for reducing the number of employee commuter trips made by car, or for-hire vehicles by 10% each year, until those trips are 25% or less of all employee commuter trips to your offices. The plan is subject to DDOT review.
For DC Employers choosing this option, the first TDM plan is due for submission on January 15, 2023. Upon receipt, DDOT will have 60 days to review and to either approve it or send back for revisions. If the plan is not approved in the 60-day period, DC Employers have 30 days to make required changes and resubmit revised plan. After the 30-day period, if the plan is still not approved, DC Employers cannot use TDM plan to comply with the Law. They must choose one of the two other options: offer Clean Air Transportation Fringe Benefit or pay Clear Air Compliance Fee.
If the plan is approved in the 60-day period, DC Employers have 90 days to provide evidence of implementation of TDM plan to DDOT. The evidence may include employer’s emails to employees announcing new commuter benefits, offering transit options, and enrollment to WMATA’s SmartBenefits program.
DC Employers with an approved TDM plan are required to submit an annual report to DDOT on their employees’ mode of transport for the previous calendar year. If employers are considered non-compliant with their TDM plan by DDOT, they have 180 days to comply, or they can no longer use TDM plan as a compliance option.
The format of the TDM plan can be accessed from DDOT’s reporting platform.
It is worth noting that your organization may have already achieved the District’s target of 25% or less employee commuter trips with car or for-hire vehicles, or nearly all of your employees may be teleworkers. But you are still required to submit a TDM plan to DDOT to demonstrate your compliance if you choose this option.
Pay Clear Air Compliance Fee
The last option for DC Employers to comply with the Law is to pay a Clean Air Compliance Fee for each employee, if they don’t want to offer Clean Air Transportation Fringe Benefit or develop a TDM plan and continue offering free or subsidized parking benefit to their employees.
The fee is $100 per month for each employee who is offered free or subsidized parking benefits (i.e., covered employees). Employee may accept or decline parking benefit, but it does not affect the covered employee count.
DC Employers must first calculate the monthly amount by multiplying $100 by the number of covered employees, then multiply that result by 12 to arrive annual Clear Air Compliance Fee due. DC Employers may choose to pay the fee for 12 or 24 months. The amount is payable to DC Treasurer and the check should be mailed to the following address:
DC Treasurer
Attn: Olga Provotorova
Frank D Reeves Center of Municipal Affairs
Sixth Floor
2000 14th Street NW
Washington, DC 20009
DC Employers electing this option must submit proof of payment to DDOT every two years, using the DDOT’s reporting platform. For a DC Employer with 20 covered employees, the calculation of Clean Air Compliance Fee due is illustrated as follows:
| Clean Air Compliance Fee Due – Illustrative Calculation | |
| Employees: | |
| Telework * | 3 |
| Works in DC Office ** | 20 |
| Total number of employees | 23 |
| Fee calculation: | |
| Covered employees | 20 |
| Clean Air Compliance Fee Per Employee | $100 |
| Monthly compliance fee | $2,000 |
| Payment period (12/24 months) | 24 |
| Clean Air Compliance Fee Due | $48,000 |
| (*) Less than 50% work performed in DC | |
| (**) Offered free or subsidized parking | |
All the compliance options provided above require reporting to DDOT every two years. The first reporting deadline is January 15, 2023.
How Do I Report My Compliance with or Exemption From the Law?
All covered employers must submit a report to DDOT every 2 years, demonstrating their compliance with or exemption from the Law, by using DDOT’s reporting platform. DC Employers must submit their first report of compliance or exemption on January 15, 2023. For those covered employers without an exemption, they must be compliant with the Law as of the same date, separate from the reporting requirement.
The necessary reporting templates and forms can be downloaded from DDOT’s reporting platform, which can currently be accessed at https://dashboard.commutifi.com/r/dccashout.
It is recommended for DC Employers, including those that does not offer parking benefits, to register with DDOT’s reporting platform by creating an account, review the reporting templates, and prepare required reports based on how they have decided to comply with the law before January 15, 2023.
Covered employers that have an exemption according to the Law, such as not providing free or subsidized parking, are also required to report their exemption by January 15, 2023. Those employers should prepare documents evidencing their exemption, such as benefits statements, memorandums, purchase date of parking spots, and submit it along with their exemption report as of the same date.
What Actions Can My Organization Take to Reduce Its Burden of Compliance with the Law?
DC Employers may choose to continue offering free or subsidized parking to maintain high employee morale, productivity or attract new talent, however, they may find it costly to comply with the Law. Covered employers may consider options below to reduce their cost of compliance or be out of the Law’s scope:
Switching to pre-tax transit or parking benefits instead of free or subsidized parking
Covered employers may consider offering pre-tax transit or parking benefits that also complies with Section 132(f) of Internal Revenue Code to their employees. By ending free or subsidized parking, employers move into exempt status and need not to implement one of the three compliance options discussed earlier. They will only be required to report their exemption every 2 years.
Ceasing to offer free or subsidized parking benefits
Although it will result in loss of a valuable benefit for the employees, covered employers may cease offering free or subsidized parking without replacing it with another transit or parking benefit. They will have an exemption and will only report it to DDOT every 2 years.
Reducing the covered employees below 20 by switching from office to hybrid work
For covered employers whose total employee figure exceeds but is closer to 20, and they may reduce their covered employee count below 20 by offering some employees to telework or have them perform 50% or more of their work in another state or by hiring new employees from other states. While any DC Employer with 20 or more covered employees need to either comply with or report exemption from the Law, if the employer has less than 20 covered employees, it is out of the scope of the Law and needs to take no action.
It is important to note that before taking any of the actions above, other factors such as employee morale, efficiency of business operations, payroll and other labor regulations must be taken into consideration.
Are There Other Details My Organization Needs to Know About the Law?
In the future, Mayor of DC may expand the definition of covered employer by including employers with fewer than 20 employees, resulting in more organizations to enter the scope of the Law. DC Employers are recommended to closely follow updates about the Law and notifications in DDOT’s reporting platform regarding changes in reporting requirements.
How Do I Get More Information About the Law?
Employers can access the text of the Law in D.C. Law Library’s website or visit goDCgo website for more details about compliance with the Law. Calibre CPA Group can help you in understanding the new Law and implementing measures to comply with it. For more information, please contact us at info@calibrecpa.com or call us at
(866) 464-2839.
Article Prepared By:
Mustafa Sapmaz, CPA, EA | Senior
