Skip to main content

Metropolitan commuter transportation mobility tax (MCTMT) - payroll expense definitions

Payroll expense 

Generally means a covered employee's wages and compensation that are subject to either Social Security or railroad retirement tax, but with no annual cap applied.

  • Specifically, payroll expense for covered employees subject to federal Social Security taxes means the total wages and compensation as defined in Section 3121 of the Internal Revenue Code (IRC), without regard to Section 3121(a)(1). Payroll expense for covered employees subject to the railroad retirement tax means the total wages and compensation as defined in Section 3231 of the IRC, without regard to Section 3231(e)(2)(A)(i).
  • In computing payroll expense, the annual cap of the amount of wages and compensation of covered employees subject to Social Security tax contained in Section 3121(a)(1) of the IRC and the railroad retirement tax contained in Section 3231(e)(2)(A)(i) of the IRC, does not apply.

Note: Under IRC Section 1402, income from certain employment is treated as income from a trade or business and is reported on federal schedule SE as net earnings from self-employment. Accordingly, the income is included in an individual's computation of net earnings from self-employment allocated to the MCTD, and therefore, is not included in the employer's payroll expense.

Types of employment treated as a trade or business under IRC section 1402 include but are not limited to:

  • services performed by a United States citizen employed by a foreign government, the United Nations, or other international organization;
  • services performed by a church employee if the church or other qualified church-controlled organization has a certificate in effect electing an exemption from employer Social Security and Medicare taxes; and
  • qualified services performed by a minister, a member of a religious order who has not taken a vow of poverty, or a Christian Science practitioner or reader.


 Back to the MCTMT page