Many professional musicians travel significant distances for work, whether it be a desired orchestra position in another city or a summer music institute position. Musicians in touring groups may spend more time on the road than at home. For musicians who must travel by air, the cost can be high.

Some musicians’ contracts provide a stipend for travel expenses, but most freelance musicians, who are independent contractors, bear that cost themselves. Now, DC has joined other metropolitan areas which require commuter transit benefits. Therefore, local musicians who are employees and rely upon mass transit to get to their gigs may be entitled to commuter benefits.

What Are Commuter Benefits?

The Internal Revenue Code (IRC) authorizes employers to offer commuter benefits to employees on a tax-advantaged basis. Commuter benefits may either be paid by the employee using pre-tax dollars or be paid by the employer as a tax-free subsidy, or some combination of the two. Although employees don’t pay tax on commuter benefits, employers may not deduct the cost of the benefits as a business expense.

Because commuter benefits encourage use of public transportation, vanpool, and similar mass transit options, they usually are only offered to employees in large metropolitan areas. New York City, San Francisco (Bay Area Air Quality Management District), New Jersey, and District of Columbia (DC) all now require certain employers to offer these benefits.

DC’s commuter benefits law took effect on January 1, 2016, but final rules weren’t adopted and effective until August 16, 2019. DC will start imposing penalties for noncompliance on November 14, 2019, ninety days after publication of the final rules.

Who gets Commuter Benefits Under DC Law?

DC’s commuter benefits law only applies to “Covered Employers.” An employer is a Covered Employer if it has at least 20 “Covered Employees” in Washington, DC. However, DC’s law doesn’t apply to federal employees or DC government.

Covered Employees are those employees (either full-time or part-time) who perform at least 50% of their working time in DC. An employee who works less than 50% of their time in DC also is a Covered Employee if their employment is based in DC and they perform a substantial amount of work in DC but don’t work over 50% of their time in any state. However, volunteers, clergy, casual babysitters, and independent contractors aren’t Covered Employees.

The law requires that an employer determine both the total number of employees as of December 31 of the previous calendar year and the average number of employees during the previous calendar year. If the greater of these two numbers is at least 20, then the employer is a Covered Employer.

What Benefits Must DC Employers Provide

Consistent with the IRC, DC Covered Employers have three commuter benefit options:

• Employee-paid payments toward a transit subsidy of up to $265 in pre-tax dollars per month through the employer’s cafeteria plan or similar arrangement.
• Employer-paid, non-taxable employee transit subsidy of $265 per month. This subsidy might be via a debit to the employee’s SmartTrip card or reimbursement of employee commuting expenses.
• Employer-provided shuttle or vanpool, such as a shuttle to/from a Metro stop.

Employers can provide a combination of 1 and 2, up to a total maximum benefit of $265. The $265 cap will increase as the cap on benefits under the IRC increases.

Although free or subsidized parking is a popular fringe benefit, it does not meet DC commuter benefit law requirements. However, starting in 2026, bicycling benefits at $265 per month may be deducted from the employee’s gross income as permitted by the IRC.

Importantly, Covered Employers need to provide commuter benefits only to Covered Employees. An employee who works less than 50% of their time in DC or who otherwise doesn’t qualify as a Covered Employee need not receive DC commuter benefits.

What Else Must DC Employers Do to Comply with DC’s Commuter Benefits Law?

DC employers must notify employees of their commuter benefit options and how to apply for and receive benefits under the employer’s program. The notice must provide contact information for an employee to obtain information about the benefits. Employers also must inform employees how to submit a complaint to the DC Department of Employment Services if they believe they are not receiving the required benefits. The notice may be via email, internal memo, a bulletin board posting, or any other reasonable means where employees are likely to see it.

Ideally, employers should provide new employees with commuter benefit notices at the same time they give them DC Notice of Hire forms. However, unlike medical insurance benefits, commuter benefits don’t have an open season. Employees may apply for them at any time.

Employers must provide commuter benefits to employees who request them. An employee who doesn’t want or need commuter benefits cannot receive extra pay, paid leave, or other compensation instead.

Employers must maintain records demonstrating compliance with the notice requirement. Employers also must maintain records showing which employees requested commuter benefits and what benefits the employees received. These records must be retained for three years.

Penalties for Noncompliance

DC employers who don’t provide required commuter benefits may be cited under DC civil infractions law. Penalties can be steep–$100 per Covered Employee for a first offense. Repeat offenders may be fined $200 per Covered Employee for a second offense, $400 per Covered Employee for a third offense, and $800 per Covered Employee for subsequent offenses.

This series draws from Elizabeth Whitman’s background in and passion for classical music to illustrate creative solutions for legal challenges experienced by businesses and real estate investors.