Tax Credits

Employers who develop and support their own employee transportation programs may apply for a state corporate tax credit for a portion of the expenses incurred to make alternative modes of transportation available to their employees.

Tax credits are available from the state of New Jersey through its Smart Moves for Business tax credit and also federal tax benefits.

How can an employer take advantage of the tax credit?
An employer who wants to take the tax credit must fulfill two requirements:

• Submit a Smart Moves For Business Program Narrative, a brief annual report to the New Jersey Department of Transportation (NJDOT).
• Complete New Jersey Division of Taxation Form Number 307, “Smart Moves For Business Program Ride Share Tax Credit Form,” and file it with the corporate tax return.

Employers must register and submit the program narrative before submitting their tax return. Registering their program narrative with NJDOT does not obligate them to implement any particular alternative modes of transportation, nor does it require them to survey employees or meet a target.

What information is required in the program narrative?
The Smart Moves For Business (SMFB) program narrative (pdf 73 kb) is a brief, form to list the SMFB services the employer offers, the annual cost of providing the services and the number of participating employees.

A participating employee is defined as “an employee participating in a commute alternative at least one day per week, regardless of the time of day he/she is scheduled to report to the work location.”

The program narrative will not require reporting of data from employee surveys because surveys are not required under the SMFB regulations. An employee survey can be conducted as a method of determining the number of participating employees and it can be voluntarily reported to NJDOT for transportation planning purposes.

The employer may submit the program narrative to NJDOT at any time before filing the applicable tax return. If the employer incurs eligible expenses that were not listed on an original program narrative, the employer may claim these expenses by submitting a revised narrative which includes the additional expenses.

Do I need to show proof of compliance with the program when I submit the Form 307 Tax Credit with my Corporate Tax Return?
No. No documentation needs to be attached to the tax credit form. If an audit is conducted by the New Jersey Division of Taxation, you are required to show a copy of the letter from NJDOT approving the program narrative as proof of compliance with this rule. The Department approves the eligibility of costs and the reasonableness of the plan, report or program narrative. The Division of Taxation reviews and approves the mathematical calculation of the tax credit.

How much is the tax credit?
The maximum tax credit amount varies by year. Please refer to the "Guidebook for New Jersey Taxes" for the tax year in question. The following is from the 2004 guidebook, paragraph 913:

Credit amount
For tax years beginning on or after January 1, 2002, the credit amount is 10% of commuter transportation benefits provided, up to a maximum ceiling amount. The credit ceiling is adjusted annually for inflation and may be claimed during accounting and privilege periods ending not later than December 31, 2007. For 2003, the maximum credit is $124. For 2002, the maximum credit was $120.

For more information on the tax credits and associated forms, please visit the New Jersey Division of Taxation Web site, find the "Forms" section and navigate to the "Print/Download Tax Forms" link, then find the "Corporate Business Tax Returns" and look for "Form 307" for the tax year in question.

What expenses are eligible for the state tax credit?
Eligible expenses fall into the following five categories:

• Administrative costs, such as personnel costs (salary, benefits, and training, but not overhead) for an Employee Transportation Coordinator and others with an administrative function for an employee transportation program, and costs to hire outside agencies to provide administrative services
• Facilities/vehicle costs, such as invoice cost of capital improvements to add or upgrade facilities that support commute alternatives, for example, bike racks and showers, information display racks, and vans and other vehicles used for ridesharing.
• Financial incentives costs, direct expenditures, such as ongoing or occasional subsidies, provided by an employer to employees using commute alternatives
• Marketing costs, supply and salary costs directly related to promotion of alternative modes of transportation to employees, including salary and benefits for in-house staff developing promotions and promotional materials, and the costs of contracting with outside agencies to provide these services
• Other program services costs, other eligible expenses, as approved by NJDOT, such as costs of a providing guaranteed ride home program through an outside vendor and the cost of providing or obtaining ride-matching services.

Employers may seek guidance from NJDOT on the eligibility of specific expenses.

Who is the contact for further information on New Jersey tax credits?
The Division of Taxation has a Web site and a phone hotline for corporate tax questions: 609-588-2200. If you wish to order any forms or instructional materials, you should call 1-800-323-4400 or place your order by fax to 609-588-4500.

You may also write to: The State of New Jersey, Division of Taxation, Taxpayer’s Service Branch, Office of Communications, P.O. Box 281, Trenton, New Jersey 08646-0281.

Federal tax benefits

There are federal tax benefits for employee commute alternatives:

The monthly limitation under Section 132(f)(2)(B) regarding the fringe benefit exclusion amount for qualified parking is $195. In other words, the 2004 amount of tax-free qualified parking benefits is $195 per month and tax-free vanpool/transit benefits are $100 per month. It is an allowed exclusion from gross income.

For more information please contact the Association for Commuter Transportation in Washington, DC at (202) 393-3497 or the Federal Transit Administration Web site.