Fringe Benefit Rules (IRC § 132)

Summary

This practice note provides guidance on how to implement fringe benefit programs that comply with Internal Revenue Code (I.R.C.) § 132. This section allows employees to exclude from gross income the value of certain fringe benefits provided to them, which differs from the general rule whereby the value of any fringe benefit received by employees is included in their taxable pay. The favorable tax treatment under I.R.C. § 132 is particularly beneficial because it avoids not only the tax on the employee's income, but also the payroll taxes that would otherwise apply to both the employee and the employer.