Parking Cash Out:

Implementing Commuter Benefits

as One of the Nation’s

Best Workplaces for CommutersSM

United States Environmental Protection Agency 

Office of Air and Radiation 

March 2005 
Parking Cash Out: 

Implementing Commuter Benefits 

as One of the Nation’s 

Best Workplaces for CommutersSM 

u Employers offering free or subsidized parking to employees can implement parking cash out. Under a parking cash out program, an employer gives employees a choice to keep a parking space at work, or to accept a 

cash payment and give up the parking space. 

u Parking cash out programs are one of the most effective means to encourage employees not to drive alone 

to work. Cash out programs are an effective means of allocating scarce parking or managing a growing 

demand for more parking. 

u Parking cash out programs benefit employees because they allow employees choose whether or not to continue driving alone. Employees perceive these programs as fair since nobody is forced to stop driving or 

give up free parking, but those who do are rewarded financially. 

u Although any employer who pays for parking can implement parking cash out, it works best for employers who lease, rather than own, parking. 

u Parking cash out is one of the primary benefits under the Best Workplaces for CommutersSM program. 

Employers must offer at least one of three primary benefits to their employees in order to receive the Best 

Workplaces for CommutersSM designation (the other two are transit or vanpool benefits and telework). 

Under the option outlined in this publication, the employer agrees to provide at least $30 per month for 

parking cash out. 

1
 
Parking Cash Out: Implementing Commuter Benefits as One of the Nation’s Best Workplaces for CommutersSM 

This document is one in a series of briefing papers designed to 

help employers implement commuter benefits to achieve the 

Best Workplaces for CommutersSM designation. 

The U.S. Environmental Protection Agency (EPA) and the 

U.S. Department of Transportation (DOT) have established a 

voluntary National Standard of Excellence for employer-provided commuter benefits. Commuter benefits help American 

workers get to and from work in ways that cut air pollution 

and global warming pollution, improve public health, 

improve employee recruiting and retention, improve employee 

job satisfaction, and reduce expenses and taxes for employers 

and employees. Employers that meet the program’s National 

Standard of Excellence are recognized as Best Workplaces for 

CommutersSM and agree to: 

u Centralize commute options information so that it is easy 

for employees to access and use. 

u Promote the availability of commuter benefits to employees. 

u Provide access to an emergency ride home (ERH) program. 

u Provide one or more of the following primary commuter 

benefits: 

✓ Transit subsidy of at least $30 per month 

✓ Vanpool subsidy of at least $30 per month 

✓ Cash in lieu of free parking worth at least $30 per 

month 

✓ Telework program that reduces commute trips by at 

least 6 percent 

✓	 Other option proposed by employer and agreed to by 

EPA. These services must reduce the rate at which 

employees drive to work alone and be perceived by 

employees as a significant workplace benefit 

u Provide three or more of the following additional commuter 

benefits: 

✓	 Active membership in a Transportation Management 

Association (TMA) or participation in a voluntary 

regional air quality management program (e.g., Spare 

the Air, Air Awareness, SEQL, Clean Air Coalition) or 

another employer-based commuter program 

✓	 Active membership in a local ozone awareness program, in which you agree to notify employees of 

expected poor air quality and suggest ways that they 

might minimize polluting behaviors 

✓	 Ridesharing or carpool matching, either in-house or 

through a local or regional agency 

✓ Pre-tax transit benefits 

✓ Pre-tax vanpool benefits 

✓ Parking cash out less than $30 per month or less than 

75 percent of the actual parking benefit 

✓ Shuttles from transit stations, either employer-provided 

or through a local TMA or similar service provider 

✓ Provision of intelligent (i.e., real-time) commuting 

information 

✓ Preferred parking for carpools and vanpools 

✓ Reduced parking costs for carpools and vanpools 

✓ Employer-run vanpools or subscription bus programs 

✓ Employer-assisted vanpools 

✓ Employer-provided membership in a carsharing program (visit <www.carsharing.net> to learn more) 

✓ Secure bicycle parking, showers, and lockers 

✓ Electric bicycle recharging stations 

✓ Employee commuting awards programs 

✓ Compressed work schedules 

✓ Telework (less than 6 percent of commute trips on a 

monthly basis) 

✓ Lunchtime shuttle 

✓ Proximate commute (where employees work at locations closer to their homes) 

✓ Incentives to encourage employees to live closer to 

work 

✓ Incentives to encourage employees to use alternative 

transportation (e.g., additional vacation time) 

✓ On-site amenities (e.g., convenience mart, dry cleaning, etc.)
 

✓ Concierge services
 

✓ Other options proposed by employers
 

u In addition, employers commit to ensuring that within 18 

months of applying, at least 14 percent of commute trips 

are taken using a mode other than driving alone. 

Disclaimer 

SM 

EPA provides this briefing as a service to employers participating 

in the Best Workplaces for Commuters . Information about private service providers is intended for informational purposes and 

does not imply endorsement by EPA or the federal government. 

The information presented here does not constitute official tax 

guidance or a ruling by the U.S. government. Taxpayers are urged 

to consult with the Internal Revenue Service of the U.S. 

Department of Treasury or a tax professional for specific guidance 

related to the federal tax law. 

2
 
Parking Cash Out: Implementing Commuter Benefits as One of the Nation’s Best Workplaces for CommutersSM 

Contents 

Parking Cash Out: A Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
 

Brief History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
 

Employer Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
 

Reduced Parking Costs and Better Parking Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
 

Fairness and Employee Satisfaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
 

Tax Considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
 

Cash is Taxable, Parking Remains Tax-Free . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
 

Increased Revenues for Government . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
 

Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
 

When Parking Cash Out Makes Sense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7


Leased Parking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7


Scarcity of Employer-Owned Parking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7


Downtown Employers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8


Suburban Employers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8


Smaller Employers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8


Implementation Issues and Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8


Low Administrative Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8


Added Payroll Costs and Payments to Non-Drivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9


Combining Parking Cash Out with Transit Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9


Percentage of Employees Likely to Participate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9


Guide to Implementation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9


Employer Questions and Answers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11


What has been the reaction of employers and their employees to parking cash out? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11


How difficult and costly is it to administer the program? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11


If I offer my employees a choice of a free parking space or its cash value under parking cash out, do I pay payroll taxes on 
 

the cash? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11


Is there a way to avoid or reduce the additional payroll taxes on the cash out? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11


What are the cost implications of implementing parking cash out for my company? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11


If I implement a parking cash out benefit, am I required to offer the full value of the parking to my employees as taxable
 

income? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12


If I currently give my employees transit passes tax-free, will starting a parking cash out program affect the tax free status of cur-
 

rent transit passes? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12


Does my entire company (or organization or agency) need to participate? What if we have multiple work sites? . . . . . . . . . . .12


3
 
Parking Cash Out: Implementing Commuter Benefits as One of the Nation’s Best Workplaces for CommutersSM 

If I offer parking cash out, what happens if an employee takes the cash instead of the parking, but continues to drive to work, 

parking elsewhere? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12


I don’t currently provide free or subsidized employee parking. Does parking cash out help me? . . . . . . . . . . . . . . . . . . . . . . . .12


Do any state or local governments offer any incentives for doing this? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13


Employer Case Studies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13


Pleasanton, California—City of Pleasanton . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13


Alexandria, Virginia—CALIBRE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13


Services that Support Implementation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13


Associations and Contacts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14


Regional Organizations and Transit Agencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14


State and Local Governments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14


Information on Tax Considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14


Emissions and Transportation Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14


Benefits at Individual Employment Sites . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15


Substantial Regional and National Potential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16


References and Publications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16


4
 
Parking Cash Out: Implementing Commuter Benefits as One of the Nation’s Best Workplaces for CommutersSM 

Parking Cash Out: A

Summary 

Parking cash out is a commuter benefit in which an employer offers employees the option to accept taxable cash income 

instead of a free or subsidized parking space at work. 

The idea behind parking cash out is simple: given a choice of 

cash or a parking space, many people would prefer to receive 

cash. Most employers in the U.S. provide free or subsidized 

parking to their employees.1 This practice encourages employees to drive to work alone, thereby increasing traffic congestion and air pollution. Given the option to take cash instead 

of the parking space, many employees will take the cash and 

choose to carpool, take transit, or walk or bike to work. The 

benefits are substantial: employees receive broader and more 

equitable commuter benefits, traffic and emissions decrease, 

and the employer may be able to reduce parking costs. 

Also sometimes called a “pay me not to drive” program or a 

“cash instead of parking” program, parking cash out encourages alternatives to driving alone to work without taking 

away the existing parking benefit. It has long been recognized 

that free or subsidized employer-provided parking is a major 

incentive to drive to work alone, yet many companies are 

reluctant to eliminate the benefit. Under a parking cash out 

program, employees may keep their tax-free parking subsidy 

or accept additional income. Employees who elect to accept 

the cash income pay taxes on it, but can use the money as 

they choose. Some people use the cash for transit fares or 

vanpooling, while others save the money by carpooling or 

bicycling or walking to work. Employees who wish to continue driving to work still receive the original free or subsidized parking and do not pay any taxes on it. 

Brief History 

The idea of parking cash out originated with Professor 

Donald Shoup at the University of California, Los Angeles. 

In 1992, the state of California enacted legislation requiring 

many employers who subsidize their employee parking to 

offer a parking cash out option.2 The law was not enforced, 

however, because of conflicts with federal tax law. 

Until 1998, federal tax law prohibited an employer from providing an option of cash income or a tax-exempt parking 

benefit. If an employer chose to give an employee the option 

of cash in lieu of a parking space, then all parking provided 

by the employer lost its tax exempt status—both the employer and employee would be required to pay taxes on the value 

of the parking subsidy. 

The Taxpayer Relief Act of 1997 amended the federal tax 

code to allow employers the option to offer taxable cash 

instead of a tax-exempt parking space. Since the act went 

into effect in 1998, the option of parking cash out has been 

available to employers nationwide. 

Employer Benefits 

Offering parking cash out can benefit an employer in many ways. 

Reduced Parking Costs and Better 

Parking Management 

Parking spaces, particularly in urban areas, are costly. 

Employers provide an estimated 85 million free parking 

spaces for commuters—spaces with a net worth of nearly 

$31.5 billion. Employers can save a substantial amount of 

money by reducing the number of parking spaces required; 

one study estimates that annual per space costs vary between 

$360 and $2,000.3 

Parking cash out can: 

u Reduce the need for employee parking and costs associated with leasing parking space. 

u Reduce the maintenance costs of parking areas. 

u Allow businesses to convert employee parking spaces to 

customer parking spots. 

u Allow businesses to convert parking spaces into revenueproducing activities. 

u Eliminate the need for new parking construction. 

Parking cash out allows employers to save on the extensive 

cost of supplying parking to employees. For certain types of 

businesses, converting employee parking to customer parking 

can make businesses more accessible to paying customers. 

1 It is estimated that nearly three-fourth of all firms in the U.S. provide free parking for their employees, with employers providing 85 million free parking spaces 

for commuters nationwide. Free parking creates a major incentive to drive to work. About 95 percent of all commuters who drive to work receive free parking, 

and most auto commuters park free even in the central business districts of large cities. (Shoup and Breinholt, 1997). 

2 California Health & Safety Code Section 4385 

3 Victoria Transport Policy Institute, Online TDM Encyclopedia, available at www.vtpi.org/tdm. Costs are based on land, construction, and operations costs for 

suburban and urban locations, and for surface, structured, and underground parking 

5 
Parking Cash Out: Implementing Commuter Benefits as One of the Nation’s Best Workplaces for CommutersSM 

Fairness and Employee Satisfaction 

Parking cash out benefits go beyond just monetary benefits. 

Expanding employee options not only increases potential 

income but also promotes employee choice and equity 

throughout the workplace. Employees praise parking cash 

out for its fairness and claim that it better serves everyone’s 

needs. Employers that have implemented cash out programs 

also have overwhelmingly positive experiences (Shoup, 

1997a), as shown by the comments below: 

u The employees think it’s fair. 

u [Cashing out] has been really positive. 

u Since we moved to cash out, we've always received a good 

response. 

u I would definitely recommend [cashing out]. We’ve always 

found that cash works. Cash is always a good incentive. 

u [Cashing out] has been a really good experience. People 

really like it. 

u People like the idea, they like the cash in hand, and it 

does add to their paycheck. 

u [Employees] love it. The ones that qualify love it. And the 

ones who drive alone don't care because they get free 

parking. 

u Compared to the previous policy, I think [cashing out] is 

fairer. 

u If we decided to scratch the program, we would probably 

end up with at least fifty or sixty more employee cars, 

with no place to park. 

u Cash works very well for us. 

The positive response to cash out may be ascribed to the fact 

that it is a simple variation on a traditional benefit. 

According to Shoup (1997a): 

Parking is a traditional part of most employers’ benefit package, and cashing out can logically relate to the parking benefit. .... Cashing out can be a normal operating procedure 

for any business because it treats all employees equally in 

terms of an important fringe benefit. Therefore, once established, cashing out is likely to become a permanent feature 

of the employers’ benefit package. 

Parking cash out offers businesses an attractive way to 

increase employee choice and satisfaction through a simple 

4 Pub. L. No. 105-34 (111 Stat. 948) 

variation on a benefit the business already offers. As 

described above, employers consistently remark that the cash 

out option helps to recruit and retain employees. Further, by 

equalizing benefits, companies provide a more equitable 

compensation package for all employees. Together, these features may help to reduce recruitment and retention costs for 

the company. 

Tax Considerations 

Although the idea of parking cash out is very simple, and in 

most cases implementation is straightforward, employers 

should review with their tax advisor possible tax implications 

for all parties. 

This section reviews some tax considerations associated with 

employer-paid parking and parking cash out, and highlights 

changes in tax law with respect to parking cash out. 

Cash is Taxable, Parking Remains TaxFree 

Under a parking cash out program, cash offered instead of 

parking is taxable as regular compensation. It is treated the 

same way as the rest of an employee’s pay: the employer 

incurs payroll taxes on it, and the employee incurs all regular 

income taxes on it. For employees who choose to keep the 

free parking (those who do not take the cash), there is no tax 

impact. Qualified parking remains a tax-free transportation 

fringe benefit. 

Until recently, this was not the case. Prior to 1998, the 

Internal Revenue Code (IRC) prohibited tax-free parking 

from being offered in lieu of taxable cash. The IRC stated 

that employer-paid parking would be tax-free only if “provided in addition to (and not in lieu of ) any compensation otherwise payable to the employee.” If an employer offered cash 

instead of parking to their employees, then parking would 

lose its tax-free status for all employees. Employees who saw 

no change in their benefits (i.e., they continued to park for 

free) would see an increase in taxes. The tax code thus created a major barrier to offering employees a choice of parking 

or cash. 

Changes in the tax code associated with the Taxpayer Relief 

Act of 1997 removed this barrier to parking cash out.4 

Starting in 1998, employers have been able to offer their 

employees the choice of taxable compensation or a taxexempt parking benefit. 

6
 
Parking Cash Out: Implementing Commuter Benefits as One of the Nation’s Best Workplaces for CommutersSM 

“Parking cash out” typically means offering cash in lieu of a 

parking space, and cash income is taxable. As a result, firms 

that cash out generally will see an increase in their payroll 

taxes associated with the cash that is provided to employees 

in lieu of parking. (Note that other cost savings may offset 

the increase in payroll taxes. See Employer Benefits above.) 

In order to minimize adverse tax impacts, employers can 

offer tax-exempt transit passes and vanpool vouchers (these 

benefits are currently tax exempt up to $105 per month for 

each employee), and may choose to do so in lieu of a parking 

space. Employers that want to provide employees with flexible commuter benefits often elect to offer tax-free transit or 

vanpool benefits, or a combination of cash and transit and 

vanpool benefits. 

Increased Revenues for Government 

Parking cash out has the potential to increase tax revenue for 

the federal government and state and local governments that 

impose income taxes. Shoup and Willson (1992b) calculated 

the potential tax revenues associated with parking cash out 

nationally using 1990 employee Census data. Of 110 million 

nonagricultural civilian employees, 90 percent are auto commuters. If the average cost of providing parking is $30 a 

month and 20 percent of commuters opted for the taxable 

cash back option, taxable income would increase by $6.1 billion per year. At a marginal tax rate of 20 percent, revenues 

would increase upward of $1.2 billion per year. This revenue 

increase would be the result of voluntary employee choice, 

with no change in tax rates. State and local governments in 

areas where average parking costs far exceed $30 could see 

substantial revenue gains. 

Employee Benefits 

Employees benefit from parking cash out because it gives 

them the option of receiving extra money instead of a benefit.5 If employees are willing to carpool, use transit, or walk 

or bicycle to work, they come out ahead financially with 

parking cash out. Because there is no detrimental effect on 

employees who continue to drive alone, both employees 

who drive alone and those who do not perceive the program 

as fair. 

When Parking Cash Out

Makes Sense 

Any employer that makes subsidized parking available for 

employees in off-street lots and garages can offer parking 

cash out. Most parking arrangements for employers that subsidize parking fall into three categories: 

u employer-owned parking. 

u bundled lease parking (arrangements where the cost of 

parking is built into the building rent). 

u unbundled lease parking (arrangements where parking is 

paid separately from rent). 

The effectiveness of parking cash out depends on the type of 

parking arrangement employers have, as well as on parking 

demand. Parking cash out tends to be most effective in the 

situations described below. 

Leased Parking 

Parking cash out works best for employers who lease their 

parking separately from their building and can let go of 

unused parking without penalty from the lessor. The employer simply leases fewer spaces and transfers the money to 

employees who do not use the parking subsidy. 

Parking cash out is most easily applied by, but is not limited 

to, employers with unbundled lease parking. These employers can adopt a parking cash out arrangement for their 

employees at any time. For every employee that accepts the 

cash out offer, the employer can reduce the number of spaces 

leased. 

Employers with bundled parking and office leases may adopt 

parking cash out, but they may be unable to immediately 

reduce their parking costs when fewer employees drive to 

work. The employer would likely attempt to renegotiate the 

arrangement to separate parking costs from office space costs 

so the company can reduce parking costs as employees sign 

up for cash instead of parking. 

Scarcity of Employer-Owned Parking 

Employers that own their own parking are the least likely to 

see immediate parking cost savings from a cash out program. 

They also may find it somewhat more difficult than other 

employers to value their parking for the purposes of cash out. 

On the other hand, if parking lots are full and the employer 

5 Note, however, that there is no requirement that an employer offer employees exactly the value of the parking space. The employer may offer any amount, either 

more or less than the actual value or cost of the space. At least one firm in the Shoup survey offered substantially more than the cost of a space, in part to provide 

true equity by offsetting the tax bite on the cash out cash. 

7 
Parking Cash Out: Implementing Commuter Benefits as One of the Nation’s Best Workplaces for CommutersSM 

is considering building, leasing, or acquiring additional parking, parking cash out can be very attractive regardless of the 

current parking lease or ownership situation. Rather than 

building and maintaining or otherwise acquiring additional 

parking, it may be much less expensive to offer employees 

cash for not parking. Cash out can also be an opportunity to 

increase parking spaces for customers, again regardless of 

lease or ownership arrangements. 

Parking cash out also works for employers that own parking 

and can rent that parking to an outside party or convert it 

into revenue producing space. In that case, the employer 

takes any revenue and transfers the money to employees who 

do not use the parking subsidy. Whenever parking is tight— 

regardless of parking lease or ownership—an employer may 

want to offer cash out to avoid having to build or acquire 

additional parking. 

Downtown Employers 

Parking cash out will generally be most popular with employees where parking is expensive and the cash option is especially valuable, such as central business districts and other 

dense urban areas. Transportation alternatives, like transit 

and high-occupancy vehicle (HOV) lanes, offer their best 

services to downtown work sites, making it easier to stop 

driving. In addition, downtown locations typically provide 

the option of paying for daily parking. This is an important 

consideration since an employee may wish to accept the cash 

out offer and take transit, carpool, bicycle or walk to work 

most days but still have the option to drive to work occasionally if the need arises. 

Employers in downtown locations are also most likely to see 

a direct benefit from reducing the number of employees 

parking at work. Downtown parking garages are expensive, 

and parking cash out is most appealing to employers when 

parking is in short supply and expensive. Downtown parking 

is also typically sold or leased space by space, making it relatively easy for employers to shift spending between parking, 

other tax-exempt commuter benefits, and salary. 

Suburban Employers 

Suburban employers are not usually thought of as obvious 

cash out candidates because they tend to own or lease parking in large blocks and almost always provide it free of charge 

to employees. However, suburban employers also have many 

reasons to consider parking cash out: 

u To limit the cost of acquiring new parking. 

u To offer customers more parking spaces. 

u To reduce maintenance and plowing costs. 

u To offer employees more compensation choices. 

u To address regional congestion or air quality concerns. 

A successful parking cash out program could "retire" enough 

parking spaces to allow land to be put to other uses. Rather 

than supplying more space for parking, an employer could 

use the land for additional office space or rent out space to 

another company. Past successes redeveloping suburban mall 

properties into denser retail environments suggest that there 

is a market for freed-up parking lot land. If the employer 

owns the parking, the employer will need to have controlled 

entry points for parking (e.g., parking gates) to ensure that 

employees do not take the cash and continue to drive to 

work and park. 

Although suburban work sites are often inadequately served 

by transit, that need not be a barrier to suburban cash out. 

Studies show that when offered an array of commuter benefit 

choices, three-quarters of those who leave their cars opt for 

carpooling and telework. The appeal of parking cash out is 

not solely dependent on the quality of public transit service 

to the work site. In fact, the flexibility of providing cash 

allows employees to choose whatever way makes the most 

sense for them to get to work. 

Smaller Employers 

Although firms of all sizes can implement parking cash out, 

small employers are an important market for cash out. Small 

firms are much more likely to lease their parking spaces compared to large firms (small firms lease 30 percent of the parking spaces they offer free to employees, while large firms lease 

only 12 percent of the parking spaces they offer free). Since 

leased parking spaces are most amenable to being converted 

into cash, small firms are an important market for cash out. 

Moreover, small employers may also be able to implement 

changes in parking policies most easily. 

Implementation Issues

and Costs 

Implementation and administration of parking cash out can be 

very simple, and usually require only ensuring that the payroll 

system accounts for the fact that some employees will elect to 

take additional taxable cash. Generally any complexities associated with this change pose a one-time challenge only. 

Low Administrative Requirements 

Parking cash out places far fewer administrative burdens on 

an employer than many other transportation demand management strategies, and produces higher response rates. The 

8
 
Parking Cash Out: Implementing Commuter Benefits as One of the Nation’s Best Workplaces for CommutersSM 

pure form of cash out (e.g., choice of free parking or extra 

income), for example, imposes no administrative burden in 

terms of distributing transit and vanpool vouchers. 

Added Payroll Costs and Payments to 

Non-Drivers 

There are two potential costs to the employer: additional 

payroll taxes, and cash out payments to employees who have 

not been driving to work. Because the parking cash out benefit paid to employees is considered additional salary, the 

employer’s payroll taxes will increase. In order to offset this 

cost, the employer could lessen the cash payment by the 

amount of the increased payroll tax. For example, if the parking space is valued at $100, instead of paying the employee 

$100 and incurring an additional $10 in payroll tax, the 

employer could pay the employee $90 and put the remaining 

$10 toward tax payment. 

The employer may also have additional costs associated with 

the cash that is paid to employees who were already commuting to work by alternative means. For most employers with 

free parking, this figure is small. A study of cash out programs implemented by firms in California found that the 

increase in employer costs was roughly equivalent to the 

reduction in parking costs. (Shoup, 1997a) 

Combining Parking Cash Out with 

Transit Benefits 

To offset the additional payroll taxes, employers may wish to 

implement a transit/vanpool benefits program along with 

parking cash out. For example, suppose an employer values 

parking spaces at $115 each. Under straight parking cash 

out, the employer would offer each employee $115 in return 

for not driving. The employer would have to pay payroll 

taxes on that $115 increment for every employee that takes 

the offer, and each of those employees would have to pay 

taxes on the $115. 

However, the employer could offer each employee $105 in 

transit/vanpool benefits, and the remaining $10 in cash. In 

this case, the employer would pay payroll taxes only on the 

$10 increment, since transit/vanpool benefits are not taxable 

up to $105. Likewise, each employee would pay taxes only 

on the $10 increment. For more information, see the separate briefing papers on Transit/Vanpool Benefits and 

Commuter Tax Benefits. 

Percentage of Employees Likely to 

Participate 

According to case studies and research, parking cash out 

tends to reduce driving to work by 20 percent or more. An 

employer implementing parking cash out should probably 

expect to see a reduction in solo driving to work of 20 percent, and likely more over time. Absolute targets would 

depend on starting points. Among eight firms surveyed by 

Shoup, the solo-driver share fell from 76 percent to 63 percent after cashing out. The firms' 76 percent starting point 

mirrored the average national mode split for work trips in 

1990, but that average hides wide variation; at many firms 

the drive-alone rate is either 100 percent or close to it. 

Guide to 

Implementation 

To implement a parking cash out program, an organization 

will typically go through the following steps: 

1) Analyze Current Parking Conditions and Policies 

A first step for any employer will be to examine current parking conditions and parking benefit policies. Key questions to 

ask include: 

u Does the employer currently provide free or subsidized 

parking to all of its employees or only at certain office 

locations? (For example, some companies provide free 

parking to employees at their suburban offices but not at 

downtown locations). 

u What are current parking ownership/lease arrangements? 

Does the organization own all of its parking? Does it lease 

parking? Will it be able to reduce the number of parking 

spaces it leases without penalty? 

u If the company owns the parking, does it have controlled 

entry points? Could it easily be converted to controlled 

entry? 

u How tight is parking? And how expensive is it? Would it 

benefit the company to reduce the amount of parking it 

provides to employees? 

Understanding current parking arrangements enables 

employers to develop the most appropriate options for their 

own circumstances. It helps in identifying the potential costs 

and cost savings of parking cash out and in selecting the 

commuter benefit program that is most beneficial to employees and the organization. 

2) Determine How to Structure a Commuter Benefits 

Program 

Human Resources staff may wish to meet with employees 

and management to discuss potential ways to structure the 

commuter benefits program. The program that is selected 

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Parking Cash Out: Implementing Commuter Benefits as One of the Nation’s Best Workplaces for CommutersSM 

usually depends on the unique circumstances of the company 

and its existing parking arrangements. Typical program 

options include: 

u Provide employees with the option to accept the choice 

between taxable cash or a parking space at work (the 

arrangement typically associated with the term “parking 

cash out”). This option may be most amenable to employers in semi-urban or suburban locations where carpooling, 

transit, walking and bicycling are viable options and 

where parking is tight. 

u Provide employees with the option to accept tax-free transit or vanpool benefits, taxable cash, or a combination of 

both, in lieu of parking at work. In locations with extensive transit or vanpooling, the employer may want to set 

up a program in which employees are given the option of 

a tax-free transit/vanpool benefit, taxable cash, or free 

parking. That way, employees who wish to use transit or 

vanpools can receive a tax-free benefit, and those who 

wish to carpool, bicycle, or walk to work can choose to 

accept taxable income. For example, the employer might 

provide the employee with the option of free parking, a 

tax-free $105 transit/vanpool benefit, or $105 in cash 

each month. Under such a situation, parking may still be 

subsidized more than other commute options; for example, if parking costs $150 per month, a solo driver receives 

a higher subsidy than a transit rider. 

u Provide employees with a “commute allowance” that provides an equivalent commuter benefit for all employees. 

Under this option, the employer might provide all 

employees with a $100 commute allowance, which can be 

used toward parking, tax-free transit or vanpool benefits, 

or taken as taxable cash income. 

In each case, the employer will need to determine program 

structure, such as: 

u How much cash to offer in lieu of the parking space (e.g., 

the full value of parking or a lower amount)? If a commute allowance is offered, at what level should it be set? 

u Will employees in all offices receive the same cash option 

or should different cash options be offered in different 

locations? (e.g., if parking is more expensive at certain 

offices, should the cash out offer reflect the higher parking 

costs? ) 

u Who will be eligible for the program: only employees who 

currently use parking or all employees? 

u At what point will employees be able to change their elections? Monthly, quarterly, or on some other basis? 

3) Obtain Senior Management Approval 

Senior management will need to approve the policy change. 

4) Work with Payroll to Set up Appropriate Payroll 

Codes 

The payroll system will need to be set up to account for the 

fact that employees will have the option to elect to accept 

taxable cash (or a tax-free transit or vanpool benefit) in lieu 

of free parking. The specific actions that need to be made 

will depend on the type of cash out program implemented, 

the payroll system used, and whether payroll is outsourced. 

5) Develop Process for Employees to Elect their 

Commuter Benefit 

The Human Resources Department will need to set up a procedure for employees to elect their commuter benefit. Again, 

this will depend on the type of commuter benefit program 

that is implemented, as well as individual organizational considerations, such as the size of the company and number of 

offices. An organization might allow employees to select 

whether they want to cash out via a form submitted to the 

HR Department or via an election over an intranet system. 

Employers may also want to provide written information 

about the benefit in an Employee Manual or Benefits Guide. 

6) Publicize and Implement the Parking Cash Out 

Program 

Once parking cash out procedures are in place, the program 

should be marketed to employees. Some ways to ensure that 

employees are aware of parking cash out include the following: 

✓ Company orientation for new employees. 

✓ Advertisements in places seen frequently by employees 

(cafeteria, garage, elevators, etc). 

✓ Distribution of program brochures. 

✓ Company newsletters. 

✓ Voicemail or e-mail broadcast. 

✓ Special promotional days. 

✓ Awards or prize drawings to recognize employees using 

transit or carpools. 

✓ Inserts to paychecks. 

✓ Company Web site or intranet. 

Because parking cash out is not a well-known arrangement, 

many employees may have questions about it. Employers 

should ensure that employees have access to information to 

answer their questions. This could include written materials, 

as well as a benefits coordinator to whom employees can go 

with questions. 

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Parking Cash Out: Implementing Commuter Benefits as One of the Nation’s Best Workplaces for CommutersSM 

Employer Questions

and Answers 

An employer’s human resources administrator or business 

manager, among others, might ask the following common 

questions when considering a parking cash out program: 

What has been the reaction of employers and their 

employees to parking cash out? 

Very positive. Cash out gives employees choice, which is 

viewed by them as a real benefit. In a study of California 

employers that have implemented parking cash out, program 

administrators characterized the program as “a really good 

experience,” “recommended,” “fairer,” and “loved by employees.” Employers consistently remarked that the cash out 

option is an added fringe benefit that helps to recruit and 

retain employees. One employer commented, “Employees are 

grateful and thankful and more motivated. So that’s a plus 

for the company.” (Shoup, 1997a, b) 

How difficult and costly is it to administer the program? 

A study of firms that have implemented cash out programs 

generally found negligible implementation costs. The study 

found that cash out programs are simple to organize and 

implement and that their ongoing administration poses no 

extra cost to the firm. Asked whether administering the payroll taxes on cash subsidies was a problem, firms uniformly 

responded that it was not. One representative estimated that 

she spent only two minutes per employee per month administering the firm’s cash out program. (Shoup, 1997a,b) 

If I offer my employees a choice of a free parking space 

or its cash value under parking cash out, do I pay payroll 

taxes on the cash? 

Yes. If the employee opts for cash instead of parking, the 

employer pays payroll taxes and the employee pays income 

and payroll taxes on the cash. For tax purposes, this cash is 

the same as all other regular salary. Employers who want a 

parking cash out offer to be entirely cost neutral should offer 

slightly less than the value of the parking as a cash stipend in 

order to cover their additional payroll taxes. 

Employees who opt for the parking do not pay income and 

payroll taxes on the value of the parking and employers do 

not pay payroll taxes on the value of the parking, even 

though the employee has the choice to convert the parking 

benefit to regular, taxable salary. This recent change to the 

law makes parking cash out a much more attractive option 

than it was in the past. 

Is there a way to avoid or reduce the additional payroll 

taxes on the cash out? 

There is no way to avoid paying payroll taxes on cash income 

that is provided to employees in lieu of a parking space. 

Employers, however, can minimize adverse tax implications 

by offering tax-free transit or vanpool benefits (currently 

capped at $105 per month). Employers can offer any combination of cash and transit and vanpool benefits. A cash out 

offer could consist of a tax-free transit voucher and the rest 

in taxable cash. An employee receiving a $150 cash out offer 

could either accept a) the whole cash out in cash, in which 

case both employer and employee pay applicable federal tax 

on the full amount or b) accept a transit or vanpool benefit 

up to $105 tax free and the rest in taxable cash. The balance 

of $150 minus the $105 tax-free benefit would leave $45 in 

income subject to employer and employee taxes. 

What are the cost implications of implementing parking 

cash out for my company? 

The total financial implications of a cash out program 

depend on the specific conditions of a company, including 

existing parking arrangements, needs for additional parking, 

and current travel patterns of employees. 

Many companies may be able to cover the direct cost of 

offering cash to employees by reducing the amount of parking they lease. For example, an employer who leases parking 

stalls for $200 per month and charges employees $50 per 

month could pay $150 per month in cash to employees who 

vacate spots and then reduce the lease cost by the number of 

vacated stalls. Instead of paying $150 for a spot ($200 for the 

lease minus the $50 charge to employees), the employer pays 

the vacating employee the $150. The only additional cost is 

the payroll taxes on the $150 income. 

In many instances, employers will incur a cost due to the 

cash out offer, particularly if the company cannot immediately reduce the amount it pays for parking. Moreover, payroll 

taxes will increase with the program, since the employer pays 

payroll taxes on cash provided to employees. If a firm offers 

all employees a parking subsidy or its cash equivalent, it will 

also end up paying commuters who are already ridesharing or 

taking transit (i.e., commuters who are not relinquishing a 

parking spot). In most cases, this will be a small percentage 

of total employees; 95 percent of employees who receive free 

parking at work drive to work. Still, the company should be 

aware of these costs. 

It is important to note that additional costs may be more 

than offset by other significant cost savings. Employers interviewed for case studies consistently remarked that the cash 

11
 
Parking Cash Out: Implementing Commuter Benefits as One of the Nation’s Best Workplaces for CommutersSM 

out helps to recruit and retain employees: “Employees are 

grateful and thankful and more motivated. So that’s a plus 

for the company.” (Shoup, 1997a, b) By equalizing benefits, 

companies provide a more equitable compensation package 

for all employees, which may provide them a competitive 

edge in a tight labor market. In addition, for employees who 

personally support environmental goals, such benefits may 

make the company more attractive than one that simply 

offers free parking and does not address other commute 

modes. Together, these features may help to reduce recruitment and retention costs for the company. 

If I implement a parking cash out benefit, am I required to 

offer the full value of the parking to my employees as taxable income? 

An employer may offer to cash out a parking space in any 

amount. The tax code says nothing about the value of a cash 

out offer. A firm may “value” a parking space at any amount. 

An employer might value the cash out offer slightly below the 

cost of paying for a parking space to cover the cost of payroll 

taxes. For example, if the employer pays $150 per month per 

employee parking space, then the employer might offer the 

employee approximately $135 instead of $150 in taxable 

income in lieu of the parking space. The employer’s contribution to Social Security and Medicare would approximate $11 

on the $135 cash, for a total cost of $146. By reducing the 

offer to slightly below the cost of the space, the employer does 

not incur costs over the original cost of the space. The employer reports the $135 expense as salary to the employee, and 

both pay their share of federal taxes. On the other hand, a 

company might cash out a space at above market rates, for several reasons: to increase employee response in order to increase 

customer parking, to avoid the need for expensive or time-consuming new construction, and/or to level the parking/nonparking playing field by offsetting the tax bite on the cash out 

cash. At least one firm in California implemented cash out at 

substantially above market rates.6 

If I currently give my employees transit passes tax-free, will 

starting a parking cash out program affect the tax free status of current transit passes? 

No. Changes in tax code resulting from the Transportation 

Equity Act for the 21st Century (TEA-21) allow employers to 

offer any combination of parking, transit, or vanpool benefits 

(up to the specified limits), either in addition to present compensation or in lieu of compensation, tax free. Section 

132(f )(4) of the Internal Revenue Code now says: 

No amount shall be included in the gross income of an 

employee solely because the employee may choose between 

any qualified transportation fringe and compensation which 

would otherwise be includable in gross income of such 

employee. 

Does my entire company (or organization or agency) 

need to participate? What if we have multiple work sites? 

The entire organization does not need to participate in a parking cash out program. It is up to your organization to decide 

what works best for you. A company may decide to implement a parking cash out program at only certain work sites, if 

desired. Sites with limited parking or expensive parking might 

be most interested in the cash out option. Other organizations 

may feel that it is important to implement one benefit package 

for employees regardless of where they work. It is up to the 

individual organization to decide what works best. 

If I offer parking cash out, what happens if an employee 

takes the cash instead of the parking, but continues to 

drive to work, parking elsewhere? 

From a tax perspective, this situation creates no problem. The 

cash in lieu of parking does not depend, for tax purposes, on a 

particular travel mode. Some employers, however, institute 

parking cash out explicitly in order to reduce driving to work, 

and may wish to discourage employees from taking the cash 

incentive and continuing to drive. In areas where parking cash 

out works best at reducing driving, such as areas where parking 

is costly, there is unlikely to be free parking near the work site 

that the employee can use instead of the employer-provided 

parking. In other cases, employers offer parking cash out to 

increase employee choice and/or to reduce the need for parking onsite. An employee who voluntarily begins using more 

distant parking may both save money and help implement the 

employer’s objectives. 

I don’t currently provide free or subsidized employee parking. Does parking cash out help me? 

The goal of parking cash out is to encourage alternatives to 

driving alone. Since you do not currently subsidize parking, 

this is not an issue for you. Recent changes in tax law regarding commuter benefits may provide you with other options 

that may be beneficial for your employees. If you are not 

already doing so, you may consider a program to allow 

employees to pay for transit, vanpools, or parking through a 

pre-tax payroll deduction. You could also implement a program to directly provide employees with transit or vanpool 

benefits or taxable cash incentives for carpooling, bicycling, or 

walking to work. 

6 The firm offered a parking subsidy of $100 per month or $150 in cash. (Shoup, 1997a). 

12 
Parking Cash Out: Implementing Commuter Benefits as One of the Nation’s Best Workplaces for CommutersSM 

Do any state or local governments offer any incentives for 

doing this? 

Yes. The State of Maryland offers a 50 percent tax credit up to 

$30 per employee per month for costs associated with providing employees a cash-in-lieu-of-parking program. Delaware, 

Connecticut, Oregon, and New Jersey also provide tax credits 

to eligible companies that implement commuter transportation benefit plans, which could include parking cash out. Each 

state tax credit is different, so employers are encouraged to 

inquire about the requirements of tax credit programs that 

may apply to them. 

Employer Case Studies 

Because of the state’s parking cash out legislation, California 

employers have been at the forefront of implementing this 

benefit. Experience with parking cash out has been limited, 

however, for a number of reasons. Most importantly, tax laws 

prohibited employers from offering cash in lieu of tax-free 

parking prior to 1998. Even now, tax law still favors parking 

since cash income provided to employees for commuting is 

taxable while parking is tax-free (up to $200 per month). 

As a result of this aspect of tax law, many organizations have 

implemented variations on the cash out concept. For example, since cash income is taxable, many companies have 

found that it is beneficial to provide transit/vanpool benefits, 

which are a tax-deductible fringe benefit for the employer, 

rather than cash. Other firms have implemented “commuter 

allowance” programs or financial incentives for alternatives to 

driving that provide more equal benefits for all commute 

options. When considered broadly, parking cash out has been 

put into effect in many ways in various parts of the country. 

The examples listed below show some of the many ways in 

which organizations can implement cash out. 

City of Pleasanton, California 

Suburban Pleasanton initiated a daily form of parking cash 

out in January 1994. The City offers $2 per day to employees who use a commute alternative instead of driving to work 

alone. All city employees are eligible to participate with no 

minimum days required. The program has resulted in annual 

savings of 20,625 trips, which translates into 12,375 gallons 

of fuel and 123 tons of CO2. In 1993, the year before the 

program was implemented, only 28 employees were commuting to work using alternative modes. Average participation in 2004 was 57 employees per month representing a 

steady rise in the last ten years. 

CALIBRE—Alexandria, Virginia 

CALIBRE provides taxable cash incentives to employees who 

commute to work via carpools or vanpools that are not eligible for the company’s transit subsidy program. Employees 

who carpool with other employees to one of the company’s 

facilities will each receive $32.50 per month in taxable 

income and must agree to accept a shared company provided 

parking benefit in lieu of an individual company provided 

parking benefit. Employees who work at a CALIBRE facility 

and who do not require any parking will receive $65 per 

month in taxable income and must agree to waive their right 

to a company provided parking benefit. 

Services that Support 

Implementation 

Emergency Ride Home Programs 

One of the barriers that prevents some employees from taking transit, ridesharing, walking or bicycling to work is the 

fear that they will not be able to get home quickly in the 

event of an personal emergency, such as picking up a sick 

child from school, or working unscheduled overtime. 

Emergency Ride Home (ERH) programs provide commuters 

who regularly carpool, vanpool, bike, walk or take transit to 

work with a reliable ride home when an unexpected emergency arises. ERH programs are designed to rescue commuters who are worried about how they will get home when 

an emergency arises. Knowing there is a ride home in case of 

emergency gives many people the security to take commuting options like transit and carpools with confidence. 

Individual employers may establish ERH programs. Usually 

the employer will pay for the employee’s ride home via taxi 

or rental car when transit or vanpool services are unavailable. 

Some MPOs and local governments have also established 

regional or countywide ERH programs for employees that 

register for the program. ERH programs tend to be low-cost 

ways to encourage transit use, especially if a company only 

“fills in” coverage for areas not covered under a broader 

regional program. For example, a regional transit agency may 

provide an emergency ride home for monthly passholders, so 

a company would have to provide ERH only for carpoolers. 

More detailed information about ERH is available in a separate briefing paper, Emergency Ride Home Programs. 

13
 
Parking Cash Out: Implementing Commuter Benefits as One of the Nation’s Best Workplaces for CommutersSM 

Associations 

and Contacts 

This section includes information on experts that employers 

might wish to utilize for expertise in understanding, promoting, or providing technical information on parking cash out. 

Individual employers are directed to contact EPA and their 

local MPOs, transit agencies, TMAs/TMOs, or other groups 

that may be able to assist in developing a cash out program. 

Regional Organizations and Transit 

Agencies 

Many regional and local governments provide services to 

help employers implement parking cash out programs. 

Metropolitan planning organizations (MPOs), city and county transportation agencies, transportation management associations (TMAs), and transportation management organizations (TMOs) throughout the U.S. provide assistance to 

employers in starting and maintaining transportation 

demand management programs like parking cash out. They 

often provide information to employers about options to 

reduce driving to work, implementation issues, and local 

programs that support employer initiatives. The appropriate 

MPO can be located through the Association for 

Metropolitan Planning Organizations (202-457-0710 x19); a 

list of MPOs with Web pages is available at 

<www.ampo.org/mposnet_old.html>. 

State and Local Governments 

A few state and local governments have also developed programs that either promote or mandate certain employers 

implementing parking cash out. They may provide valuable 

information on implementation issues and marketing 

approaches. These include: 

State of California, Parking Cash Out Legislation 

California Air Resources Board 

916-327-2980 

cashout@arb.ca.gov 

<www.arb.ca.gov/planning/tsaq/cashout/cashout.htm> 

King County Metro, Commute Trip Reduction (CTR) law 

206-684-4444 

employer.services@metrokc.gov 

<http://transit.metrokc.gov/prog/employer/ctr-law.htm> 

City of Santa Monica, Mandatory Parking Cash Out 

Program 

Contact: Jackie Brooks, 310-458-8956 

<http://santa-monica.org/planning/transportation/ 

abouttransmanagementtmo.html> 

Downtown Minneapolis TMO 

612-370-3987 

<www.mplstmo.org> 

Information on Tax Considerations 

The Internal Revenue Code that governs employer-provided 

commuter benefits is found at 26 USC Section 132(f ), and 

is available on the web at: <www.irs.gov> or 

<tmi.cob.fsu.edu/act/f_benefit.htm>. 

For more information relating to qualified transportation 

fringes in Section 132(f ), visit the Internal Revenue Service 

(IRS) website at www.irs.gov. This site contains useful information for employers regarding the tax treatment of fringe 

benefits. Some publications available from the IRS that may 

be useful include: 

u Publication 15a, Employer’s Supplemental Tax Guide -

Section 6. Employee Fringe Benefits 

www.irs.gov/prod/forms_pubs/pubs/p15a08.htm 

u Publication 15b, Employer’s Tax Guide to Fringe Benefits 

- Transportation (Commuting) Benefits 

www.irs.gov/prod/forms_pubs/ pubs/p15b0215.htm 

u Final Regulation Concerning Qualified Transportation 

Fringe Benefits (Issued January 11, 2001) 

frwebgate.access.gpo.gov/cgibin/getdoc.cgi?dbname=2001 

_register&docid=01-294-filed.pdf 

For more information relating to qualified transportation 

fringes in Section 132(f ), send a written request to: 

Freedom of Information Reading Room 

PO Box 795 

Ben Franklin Station 

Washington DC, 20044 

Or contact Patricia Holtzworth at the IRS at 202-622-6040. 

Best Workplaces for CommutersSM 

For more information on Best Workplaces for CommutersSM, 

contact the BWC information request line at 888-856-3131, 

or visit <www.bwc.gov>. 

Emissions and 

Transportation Benefits 

Parking cash out has great potential to reduce vehicle travel 

and emissions of air pollutants and greenhouse gases. Case 

studies of firms that have implemented cash out programs 

14
 
Parking Cash Out: Implementing Commuter Benefits as One of the Nation’s Best Workplaces for CommutersSM 

show that firms cashing out take the equivalent of 1 out of 8 of 

their employees’ commuting cars off the road. 

Benefits at Individual Employment Sites 

Monitored cash out programs show substantial reductions in 

single occupancy commuting. These reductions, in turn, 

reduce automobile emissions, congestion, and parking problems. An analysis of eight California firms implementing cash 

out by Shoup (1997 a, b) provides the best data on the effects 

of parking cash out: 

Significant decrease in solo driving 

As shown in the accompanying chart: 

u Solo driving dropped 17 percent: from 76 to 63 percent 

of employees. 

u Carpooling increased by 64 percent: from 14 to 23 percent of employees. 

u Transit use rose by 50 percent: from 6 to 9 percent of 

employees. 

u Combined bicycling and walking rose one-third: from 3 

to 4 percent of employees. 

Commuter Mode Shares: 

Before and After Cashing Out 

80%
 

70%
 

60%
 

Before Cashing Out 

50% 

After Cashing Out
 

40%
 

30%
 

20%
 

10%
 

0%
 Solo Carpool Transit Walk Bicycle 

Driver 

Significant decrease in miles driven7 

u An average 2.6 fewer miles per employee per workday 

among all employees offered cash out (not just employees 

accepting the offer). 

u This resulted in an average 12 percent fewer vehicle miles 

traveled (VMT) per year per employee. This reduction is 

equivalent to removing one of every eight cars driven to 

work. 

Emission reductions per employee per year tracked VMT 

reductions: a 12 percent reduction in vehicle emissions from 

commutes.8 

The results from these case studies confirm estimates from 

previous research based on parking pricing at workplaces. A 

summary of seven studies comparing either: (1) commuting 

behavior before and after employer-paid parking was eliminated; or (2) the commuting behavior of matched samples of 

commuters with and without employer-paid parking, found 

that when commuters paid for parking, they drove an average of 53 cars to work per 100 employees. When commuters 

parked free, they drove an average of 72 cars per 100 

employees, suggesting a likely 26 percent drop when free 

parking begins to have a price attached. (Shoup, 1995) 

Although parking cash out aims to “level the playing field” 

by eliminating the subsidy for solo drivers, it does not 

achieve this goal entirely: “cashing out reduces but does not 

eliminate the tax subsidy for solo driving because commuters 

must pay income taxes on the in-lieu cash. When commuters 

are offered the cash option, income taxation reduces the 

after-tax opportunity cost of taking a free parking space.” 

(Shoup, 1997a) However, we can expect to see impacts rise 

over time. Shoup (1997a) again explains: 

Cashing out is a new practice, and few firms have sufficient 

years of experience to provide evidence of longer-term effects. 

Because seven of the eight case studies examined commuters’ 

responses after only one or two years of cashing out, the 

longer-term reductions in vehicle use may be underestimated. 

For one firm, records are available for three years after the 

cash out program began, however, and the solo-driver share 

fell in each of the following three years. 

The firms’ representatives offered two practical explanations 

for this longer-term decline in solo driving. First, new 

employees who have not already made their commuting 

choices are more willing to try ridesharing if they can take 

cash in lieu of free parking. Second, when cashing out is 

available, word of mouth spreads the idea among fellow 

workers. Those who have taken the cash describe the deal to 

others, and more begin to try it. 

7 VMT determined by multiplying the number of vehicle trips to work by the average round-trip distance. 

8 Calculated by multiplying reductions in vehicle trips and VMT by emissions created per trip. 

15
 
Parking Cash Out: Implementing Commuter Benefits as One of the Nation’s Best Workplaces for CommutersSM 

Substantial Regional and National Potential 

Given that most employers provide free parking to their 

employees, there is large potential for parking cash out to 

produce significant regional and national reductions in vehicle travel, air pollution, and greenhouse gases. The extent of 

these impacts will depend on the number of employers that 

actually adopt cash out programs. Nationally, parking cash 

out could reduce VMT by between 5 billion miles and 24.9 

billion vehicle miles by 2007, depending on adoption rates -

a 0.8 to 4.2 percent reduction in commute VMT. Since most 

reductions in travel are expected in urban areas, the percent 

reduction in commute VMT in large metropolitan areas 

would likely be larger, with commensurate congestion benefits.9 Shoup (1997a) estimates that full national parking cash 

out “could reduce the equivalent of all vehicle travel and 

vehicle emissions for commuting by 800,000 households.” 

Studies have shown that increasing the price of parking is 

one of the most effective ways to reduce driving. Parking 

cash out can also be effective since it creates an “opportunity 

cost” of driving to work—the foregone income—without 

actually increasing the price of parking. 

References and 

Publications 

Commuter Transportation Services, Inc. No date. “Parking 

Management as a Transportation Demand Management 

Tool.” 

Husick, Tanya. 1992. The Effects of Parking Pricing and a 

Transportation Allowance on Commute Behavior and 

Employee Attitudes. Commuter Transportation Services. Los 

Angeles, December 15. 

International Council for Local Environmental Initiatives 

(ICLEI). Local government guide to parking ca$h out. 

Available from: www.iclei.org/us/cashout/ 

King County Metro, Municipality of Metropolitan Seattle, 

Service Development Division. 1993. “Managing Employee 

Parking in a Changing Market.” Available from: 

www.bts.gov/smart/cat/sdd.html 

King County Metro, “Parking Cash out” fact sheet. 

transit.metrokc.gov/programs_info/employer/ parkcash.pdf 

K.T. Analytics, Inc. 1995. Parking Management Strategies: A 

Handbook For Implementation, Regional Transportation 

Authority (Chicago). 

Kyle Maetani, Michael Kodama, Richard Willson, William 

Francis & Associates. 1996. “Using Demand-Based Parking 

Strategies to Meet Community Goals”, Local Government 

Parking Management Handbook, Mobile Source Air 

Pollution Reduction Committee (MSRC). 

KPMG Peat Marwick LLP. 1995. Commuter Choice 

Initiative, Weighted Survey Results, Employer-Provided 

Transportation Benefits. Prepared for U.S. DOT and U.S. 

EPA, Commuter Choice Initiative. November 3. 

Shoup, Donald C. 1999. “In Lieu of Required Parking,” 

Journal of Planning Education and Research, Vol. 18 

(Summer), No. 4, 307-320. 

Shoup, Donald C. 1998. “Congress Okays Cash out,” 

Access, No. 13, pp.2-8. 

Shoup, Donald C. 1997a. “Evaluating the Effects of Cashing 

Out Employer-Paid Parking: Eight Case Studies,” Transport 

Policy, Vol. 4, No. 4, October 1997, pp. 201-216. [An article 

based on the report of the same name, below] 

Shoup, Donald C. 1997b. Evaluating the Effects of Parking 

Cash out: Eight Case Studies, Sacramento: California 

Environmental Protection Agency, 1997, 240 pp. 

Shoup, Donald C. 1997c. “The High Cost of Free Parking,” 

Journal of Planning Education and Research, Vol. 17 (Fall), 

No. 1, 3-20. 

Shoup, Donald C. 1995. An opportunity to reduce minimum parking requirements. Journal of the American 

Planning Association, Vol. 61, No. 1, 14-28. 

Shoup, Donald C. 1994. “Cashing Out Employer-Paid 

Parking: A Precedent for Congestion Pricing?” in Curbing 

Gridlock, Peak-Period Fees to Relieve Traffic Congestion, 

Volume 2, Washington, D.C.: National Academy Press, pp. 

152-200. 

Shoup, Donald C. 1993. “Cashing Out Employer-Paid 

Parking” Access, No. 2, pp. 3-9. Reprinted in TDM Review, 

October 1993, pp. 20-24. 

Shoup, Donald C. 1992. Cashing Out Employer-Paid 

Parking, Washington, D.C.: U.S. Department of 

Transportation, 156 pp. 

Shoup, Donald C. and Mary Jane Breinholt. 1997. 

“Employer-Paid Parking: A Nationwide Survey of Employers’ 

Parking Subsidy Policies.” The Full Costs and Benefits of 

Transportation: Contributions to Theory, Method and 

9 Memorandum from Grant, Gottsman, and Wheeler-Smith of Hagler Bailly to Catherine Preston of EPA, March 9, 1999. 

16 
Parking Cash Out: Implementing Commuter Benefits as One of the Nation’s Best Workplaces for CommutersSM 

Measurement. Eds. David L. Greene, Donald W. Jones, and 

Mark A. Delucchi. Berlin: Springer Press. 

Shoup, Donald C. and Richard W. Willson. 1992a. “Solving 

the Parking Problem,” Transportation Planning, Vol. XIX, 

No. 2, Summer, pp. 9-13. 

Shoup, Donald C. and Richard W. Willson. 1992b. 

“Employer-Paid Parking: the Problem and Proposed 

Solutions,” Transportation Quarterly, April, pp. 169-192. 

Shoup, Donald C. and Richard W. Willson. 1992c. 

“Commuting, Congestion and Pollution: The Employer-Paid 

Parking Connection,” prepared for the Federal Highway 

Administration Congestion Pricing Symposium, June. 

U.S. Department of Transportation, Federal Transit 

Administration. No date. “Parking Cash out.” TDM Status. 

Prepared by K.T. Analytics. www.fta.dot.gov/library/planning/tdmstatus/FTACASH3.HTM 

U.S. Environmental Protection Agency. Employer Provided 

Benefits. Available at: http://www.epa.gov/oms/transp/comchoic/ccmeasur.htm 

U.S. Environmental Protection Agency. 1998. “Protocol 

Development Guidance: Using Emission Reductions from 

Commuter Choice Programs to Meet Clean Air Act 

Requirements.” June. 

Van Hattum, David, Cami Zimmer, and Patty Carlson. 

2000. “Implementation and Analysis of Cashing out 

Employer Paid Parking by Employers in the Minneapolis-St. 

Paul Metropolitan Area.” Submitted to the MPCA and the 

U.S. EPA. June 30. 

Victoria Transport Policy Institute. TDM Encyclopedia: 

Employee Financial Incentives. Available at: 

www.vtpi.org/tdm/tdm8.htm 

Ordering 

This publication may be ordered from the National Service 

Center for Environmental Publications (NSCEP) at: 

U.S. Environmental Protection Agency 

NSCEP 

P.O. Box 42419 

Cincinnati, OH 45242-2419 

Phone: (800) 490-9198, Fax: (513) 489-8695 

For More Information 

This guidance document and other information about 

Best Workplaces for CommutersSM are available at 

<www.bwc.gov> or by calling the BWC information request 

line at (888) 856-3131. 

Acknowledgements 

This document was prepared for EPA’s Office of 

Transportation and Air Quality under contract 68-W6-0029 

by ICF Consulting and updated by Eastern Research Group 

under contract GS-10F-0125P. 

We would like to thank the various reviewers who provided 

comments and feedback on the document. 

17
 
Visit www.bwc.gov • Call 888 856-3131 • E-mail bwc@epa.gov 

EPA 420-S-01-006 

Updated March 2005