The IRS released Revenue Ruling 2006-57 on November 20, 2006.  This ruling provides guidance to employers on the use of smartcards and debit cards to provide qualified transportation fringe benefits under section 132 (f) of the Code.

The effective date of this revenue ruling is January 1, 2008.  Employers and employees may rely on this revenue ruling with respect to transactions occurring prior to January 1, 2008. 

The guidance did not address use of electronic payment cards for parking reimbursement plans under Code section 132. 

In brief, the guidance does address three permissible programs. 

First, the use of smart cards; second the use of terminal-restricted debit cards. 

Both of these cards are considered vouchers and require no substantiation requirements.

And third, the use of MCC restricted debit cards where:

The card cannot be used for the first month and the purse value is funded only by  reimbursements for substantiated transit  expenses that have been incurred, rather than based on salary reduced contributions.  

DataPath is currently reviewing this guidance and will keep you posted. 

Click on the link below to see the full text of the Revenue Ruling.

http://www.irs.gov/irb/2006-47_IRB/ar05.html