The IRS has issued a frequently asked question page[1] to describe relief for vehicles used in a van pool that may fail to meet the 80% mileage test to be considered a “commuter highway vehicle” due to the COVID-19 pandemic.

The IRS seeks to answer the following question:

For the 2020 calendar year, under what conditions is a vehicle used in a van pool considered a “commuter highway vehicle” for purposes of the qualified transportation fringe benefit requirements under section 132(f) of the Internal Revenue Code (Code) if, during the COVID-19 public health emergency, 80 percent of the vehicle’s mileage for the year is not attributable to trips during which the number of employees transported from their residence to their place of employment is at least 50 percent of the adult seating capacity of the vehicle (not including the driver)?[2]

The FAQ answer describes the normal requirements for the vehicle to be treated as a commuter highway vehicle and why that would be important to an employer:

For 2020, up to $270 per month in qualified transportation fringe benefits provided by employers may be excluded from income and wages of employees under section 132(f). Qualified transportation fringe benefits include employer reimbursements made to employees for the cost of commuting between their residence and their place of employment in commuter highway vehicles that meet certain requirements, often called van pools. Van pools may be operated by employees, employers, or by private or public transit companies.

Vehicles used in a van pool operated by employees and employers must satisfy certain occupancy and mileage requirements in order for the reimbursements to be eligible for exclusion from income under section 132(f). Specifically, employer-operated and employee-operated vehicles must have a seating capacity of at least 6 adults (not including the driver), and it must be reasonable to expect that for the year at least 80 percent of the mileage will be (i) for transporting employees between their residences and their place of employment, and (ii) used on trips during which the number of employees transported for commuting is at least 50 percent of the adult seating capacity (not including the driver). These requirements are sometimes referred to as the “80/50 requirement”.[3]

The treatment for 2020 under this FAQ is described as follows:

If, at the beginning of the 2020 calendar year, the employer reasonably expected that at least 80 percent of the vehicle’s mileage for the year would be used to transport employees from their residences to their place of employment and that the number of employees transported in the vehicle would be at least 50 percent of the adult seating capacity of the vehicle (excluding the driver), but due to the COVID-19 emergency these requirements were not satisfied, then, provided the seating capacity is at least 6 adults (not including the driver), the vehicle would be considered a “commuter highway vehicle” within the meaning of section 132(f)(5)(B) for the duration of 2020. For this purpose, the COVID-19 emergency is considered to have commenced on March 13, 2020, the date of the President’s emergency declaration.

…

If the employer reasonably expected the vehicle to meet the 80/50 requirement at the beginning of the 2020 calendar year, then the value of van pool transportation provided by an employer to its employees and cash reimbursements from an employer to its employees for expenses incurred in connection with an employee-operated van pool may be excluded from the employee’s gross income as a qualified transportation fringe benefit for the 2020 calendar year, up to $270/month, provided the other requirements of section 132(f) are satisfied.[4]

[1] “Frequently Asked Question about COVID Relief for Van Pools,” IRS webpage, December 3, 2020, https://www.irs.gov/newsroom/frequently-asked-question-about-covid-relief-for-van-pools (retrieved December 5, 2020)

[2] “Frequently Asked Question about COVID Relief for Van Pools,” IRS webpage, December 3, 2020

[3] “Frequently Asked Question about COVID Relief for Van Pools,” IRS webpage, December 3, 2020

[4] “Frequently Asked Question about COVID Relief for Van Pools,” IRS webpage, December 3, 2020