One option is for an employer to provide “qualified transportation fringe benefits” in the form of transit passes. Transit passes include a pass, token, farecard, voucher or similar item entitling a person to transportation (or transportation at a reduced price) on mass transit facilities (rail, bus, and ferry) or in certain vehicles for hire.

Exclusion from income. Employees are able to exclude from gross income an aggregate value of up to $105 per month, as indexed for 2006, in employer-provided qualified transportation fringe benefits.

An employer making cash reimbursements must establish a bona fide reimbursement arrangement to ensure that employees have incurred expenses for transit passes.

Employer must provide “transit media.” In areas where there are "readily available transit media" (such as a ticket or pass), an employer must purchase the ticket or pass and distribute it to the employee. Thus, if a transit pass is readily available, an employee must receive an actual pass and not a cash reimbursement.

No substantiation for passes. There are no substantiation requirements if an employer distributes transit passes. Thus, an employer may distribute a transit pass for each month with a value of not more than $105 without requiring any certification from the employee regarding the use of the transit pass. An employer may, however, choose to impose substantiation requirements even though it is not required to do so.