John, who is President and CEO of ZZZ Corporation which owns the ZZZ hotel chain, is working with his Human Resources department to design an employee fringe benefits package. He would like employees to receive discounts on goods and services provided by the corporation, would like to provide free hotel rooms to employees, would like to provide transit passes or pay for parking in metropolitan areas, and would like to provide recreational and athletic facilities. What issues should John consider in designing his package?
Answer: John should be aware that some employee fringe benefits (working condition fringes, for example) can discriminate in favor of highly compensated individuals without triggering taxable income. In addition, he should determine the requirements for non taxability of no-additional-cost fringes (free hotel rooms), the maximum discounts allowed on goods and services to ensure non taxability, as well as the rules for exclusions from income for nondiscriminatory parking and transit passes, etc.