Road Rights- The Commuter Tax Benefit
By Bob Mionske
Eight years ago, representative Earl Blumenauer had an idea—if the law allows employers to offer tax-free fringe benefits to subsidize their employees who commute by car, or by transit, shouldn’t the law also offer those kinds of benefits to cyclists?
Was Blumenauer the first to think about this? I don’t know. But because he’s a Congressman (representing Portland, Oregon), he was in a position to do something about it. They say that the average length of time it takes new legislation to pass is seven years; as if in evidence of that, it took Representative Blumenauer the next seven years to get the Bicycle Commuter Act passed.
In the most memorable incident arising from previous attempts to pass the legislation, when the Bicycle Commuter Act was included as a part of Renewable Energy and Energy Conservation Tax Bill of 2007, Representative Patrick McHenry ridiculed the proposed legislation from the floor of the House:
The Bicycle Commuter Act did not pass in 2007, but Rep. Blumenauer continued to persevere, and it did pass in October of 2008, when it was attached in the Senate to the financial rescue package. The Bicycle Commuter Act became effective in the tax year beginning January 1, 2009.
So how does the tax benefit work? Basically, it allows your employer to offer you $20 per month, untaxed, as a fringe benefit to your employment. Employers already offer these types of fringe benefits to their commuters to help offset parking or transit costs; the Bicycle Commuter Act simply allows employers to extend a similar fringe benefit to their employees who commute by bike. As with those other fringe benefits, the bicycle commuter benefit is intended to be used to offset the costs of commuting.
For cyclists, that means that you can use the money to offset your commuting-related purchases, such as a bicycle, or tires, or accessories such as helmets, locks, or clothing. You can also use it to offset the cost of paying for services, such as parking facilities, shower facilities (for example, if you pay fees to a health club to use the shower before you arrive at your office), and maintenance.
Of course, $20 doesn’t go far these days. The benefit, as originally conceived by Rep. Blumenauer, was supposed to be $80 per month, which is still below the $120 that transit commuters receive monthly, and even further below the $230 monthly benefit commuters receive to offset parking costs. However, there was political opposition to that $80 figure, so it was trimmed down to $20 per month in order to gain support in Congress.
That opposition may have evaporated following the November election. Just 3 months after the new tax benefit took effect, Rep. Blumenauer surprised the National Bike Summit when he announced that he has introduced legislation (H.R. 863) that will allow employees to combine cycling and transit benefits in any month, with a total monthly benefit equal to the monthly transit benefit of $120. The intent of the legislation—called the Multimodal Commuter Credit—is to provide more flexibility to bike commuters, by allowing them to take transit on some days, and ride on other days, or to combine bicycle and transit modes on the same commute.
So what’s in it for employers who provide this benefit? According to the League of American Bicyclists,
OK, so the bicycle commuter tax sounds interesting to you—how do you go about claiming this benefit? Well, that’s an interesting question. Because it’s a fringe benefit of employment, it’s something that your employer would have to offer you. The League of American Bicyclists suggests one method that helps employers interested in providing this benefit to their employees:
Another way to provide the benefit would be for the employer to directly reimburse the commuting employee for up to $20 per month in bicycle-related commuting expenses. As the League explains,
There are two main qualifications defining who is eligible to receive the benefit. One of the qualifications is that the bicycle commuter can’t also be receiving a transit or parking benefit. The other is that the bicycle commuter “regularly uses the bicycle for a substantial portion of the travel between the employee’s residence and the place of employment.” In case you don’t know what the statute means by “regularly uses” or “substantial portion,” join the crowd. The legislation doesn’t define those terms, and so far, the IRS hasn’t defined them either. About the only thing we can gather from those two qualifications is that, because the bicycle commuter isn’t receiving a transit or parking benefit during the same month that s/he is receiving the bicycle commuter benefit, s/he is probably not driving or using transit much to get to work. This raises another point—it’s not necessary for you to ride year-round to claim the benefit. You could, for example, commute by bicycle from May through September, and claim a bicycle commuter benefit during those months, and claim either a parking or transit benefit during those months when you are not commuting by bike.
As the League of American Bicyclists notes, the bicycle commuter benefit is a modest one. Nevertheless, if it proves popular, as the League expects it will—or if the House passes Blumenauer’s new legislation—we’ll have a modest first step towards a more equitable fringe benefit.
(Research and drafting provided by Rick Bernardi, J.D.)
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