Advisory Committee on Tax Exempt and Government Entities (ACT ...

NO- ADDITIONAL COST FRINGE BENEFITS No-Additional-Cost BenefitsA service provided to employees that does not impose any substantial additional cost may beexcludable as a no-additional-cost fringe benefit. The service must be offered to customers inthe ordinary course of the line of business in which the employee performs substantialservices.No-additional-cost services occur frequently in industries with excess capacity services, suchas transportation tickets, hotel rooms, entertainment facilities, etc.; however, they may occurwith governmental facilities as well (for example, a municipal golf course or recreationcenter).For more information on no-additional-cost benefits and restrictions that apply to them, seePublication 15-B. IRC The determination of a reasonable period of time will depend on thefacts and circumstances. The timelines provided by the Regulations are intended as safeharbors for employers. §132(a)(I)Qualified Employee DiscountsIn some cases, employees may be able to purchase goods or services from the employer at alower price than offered to the general public. In general, the amount of the discount onservices is excludable if it is no more than 20% of the price charged to the general public forthe service.For merchandise or other property, generally the excludable discount is limited to theemployer's gross profit percentage times the price charged to the public for the property.For more information, see Publication 15-B. IRC§132(a)(2)