Independent Contractor Compliance Blog - by Collabrus™

SAN FRANCISCO–Supervisor Ross Mirkarimi has introduced legislation that would require city and county of San Francisco employers to offer one of three pro-transit programs to any employee who works 10 hours or more per week. Not doing so could result in penalties of up to $500. Transit advocates say the law would boost Muni ridership and reduce carbon emissions.

San Francisco has enacted other employer requirements not seen elsewhere.

This is the latest employer requirement proposed by San Francisco officials. In the past the city has required paid sick leave, health care benefits and a minimum wage that is one of the nations highest. San Francisco also has a 1.5% employee tax assessed on employers on top of state and federal payroll taxes.

Proposed law highlights

The proposed law would require businesses with 20 or more employees to establish a program to promote the use of public transit by its workforce. Participation by employees would be voluntary. Businesses would be required to select one of three options:

1. Offering workers free transit passes or vanpool reimbursement;
2. Providing door-to-door shuttle service on vans or buses,
3. Use the existing federal program in which employees can set up pretax commuter accounts to pay for travel on train, bus, ferries or by vanpool. (The accounts could not pay for parking under the San Francisco proposal, which is acceptable under federal law).

What looks like the best option right now?

The third option (pretax federal program) is relatively cost free to the employer. It also would save an estimated 40 percent on the employee’s commute costs. A San Francisco Municipal Railway FastPass, for example, would cost a participant $27 instead of $45. Also this option provides employers a 9 percent reduction on the participating employees’ federal payroll taxes. The San Francisco Chronicle reports that passage at the full board is expected.

A special benefit you may not know about

When I was reading about this proposal, I thought of a federal law that allows an additional benefit for independent contractors who participate in this type of program.

Value of transit passes for independent contractors do not need to be included on the 1099 MISC.

Although you cannot provide qualified transportation fringes to independent contractors, the working condition and de minimus fringe rules for transit passes and parking apply to independent contractors. Therefore, contributions for tokens or passes that enable an independent contractor to commute on a public transit system (not including privately operated van pools) are excludable from the independent contractor’s gross income and are not reportable on Form 1099-MISC, if their value is $21 or less per month. However, if the value of a pass provided is greater than $21 a month, the full value is includible in gross income and is reportable on Form 1099-MISC.

This can be an additional incentive in recruiting ICs.