Bailout Bill Includes Bike Commuting Benefit

Remember Oregon Congressman Earl Blumenauer’s long-sought $20 per month tax credit for bike commuters, intended to extend a benefit to cyclists that motorists have received for decades? The measure ridiculed by North Carolina Rep. Patrick "Give Me Fossil Fuels or Give Me Death" McHenry? It didn’t make it into law last year, but it seems the bike commuting credit has found its way into the latest version of the financial bailout package.

Section 211 of the "Emergency Economic Stabilization Act of 2008" allows for a "qualified bicycle commuting reimbursement" for "reasonable expenses incurred by the employee during such calendar year for the purchase of a bicycle and bicycle improvements, repair, and storage, if such bicycle is regularly used for travel between the employee’s residence and place of employment."

Other transpo-related items in the bill include credits for biofuels and other "alternative" mixtures, plug-in electric vehicles, and what looks like a few goodies for oil and natural gas producers. Another section includes incentives for green construction and renewable energy production.

The full text of the 451-page bill, expected to be taken up by the House of Representatives on Friday, is available here. Tell us if you find other items of interest.

  • Larry Littlefield

    The tax break is symbolic, because bicycles are too cheap to really benefit from a tax break.

    Even in the unlikely event that one could prove $240 per year in costs, and wasn’t affected by either the AMT or having the standard deduction exceed itemized deductions, the maximum benefit would probably be under $100, and the paperwork burden would be great.

    Health care, on the other hand, is expensive, and breaks for cyclists there could be a real benefit. The recent posts on the interest of health care companies in bicycles is much more important.

    In fact I wrote my health care provider asking why, given its willingness to subsidize health club and sports equipment costs, it wasn’t willing to pay for bicycles? Critically, lower health care costs could be an incentive for employers, who would then have a reason to provide facilities.

  • Maybe it’s time for a rename…
    Emergency Economic Stabilizers Act of 2008

  • TwoWheels

    I’m sad to see this attached to the bailout bill, but glad to see it finally happen.

    As for proving $240 per year in costs:

    I ride about 20 miles round trip, 4 days per week, 50 weeks per year for commuting, so 4000 miles of just commuting.

    4000 miles = 1 chain ($30), two tires ($50), four tubes ($8), 1 cassette ($30), .25 crankset ($50), 1 set of cables and housing ($25), 2 rolls of bar tape ($15). Throw in a few broken blinkie lights, a broken fender, and for most people labor costs it’s EASY to exceed $240 per year!

  • Larry Littlefield said: “Even in the unlikely event that one could prove $240 per year in costs,”

    Well, the obvious item is the bicycle itself, but otherwise, how about lights, bike clothing, panniers, and other gear? I am fairly certain I spend $240 or more each year on accessories for my commute.

  • Steve Barner

    I’d certainly be able to account for $240 in direct costs, though I’d dislike keeping the associated paperwork. Also, I use multiple bikes for commuting, depending on the weather, and I also use some of these bikes for non-commuting, so the costs are pretty difficult to prove in terms of actual commuting costs.

    However, if I could use this credit to amortize the cost of a new Independent Fab or Kogswell, I could sure improve the fun of the bike I’m riding on my daily commute!

  • Jim

    All this would do is allow your employer to deduct the fringe benefits that they pay to you for bike commuting. The trick is to get your employer to do that.

    $240 in costs would be very easy to reach.

  • crlinder

    @ Jim

    My employer doesn’t give me any fringe benefits for biking to work, and I don’t know any that does. I’m fairly certain it’s not common.

  • Peter

    “SEC. 211. TRANSPORTATION FRINGE BENEFIT TO BICYCLE COMMUTERS”

    From reading the bill, there IS no requirement to prove expenses.

    The intent is to encourage employers to pay their employees $20 for every month that they “regularly uses the bicycle for a substantial portion of the travel between the employee’s residence and place of employment” and then reimburse the employer.
    Other than a small paperwork hassle, there is virtually no cost to the employer so I can’t see why they wouldn’t do it, if you ask them.

    FWIW “Regularly” isn’t defined in the bill. Riding in on the first Monday of every week is “regular”.
    They didn’t fund any “FRINGE benefit police”, this seems pretty much like free money for cyclists.

  • Just for grins, here’s the full text of section 211 where the commute credit was amended in. I’m not used to reading these things so I’m not sure what it is that’s actually being amended.

    211. TRANSPORTATION FRINGE BENEFIT TO BICYCLE COMMUTERS.
    (a) IN GENERAL.–Paragraph (1) of section 132(f) is amended by adding at the end the following:
    “(D) Any qualified bicycle commuting reimbursement.”.
    (b) LIMITATION ON EXCLUSION.–Paragraph (2) of section 132(f) is amended by striking “and” at the end of subparagraph (A), by striking the period at the end of subparagraph (B) and inserting “, and”, and by adding at the end the following new subparagraph:
    “(C) the applicable annual limitation in the ease of any qualified bicycle commuting reimbursement.”.
    (c) DEFINITIONS.–Paragraph (5) of section 132(f) is amended by adding at the end the following:
    “(F) DEFINITIONS RELATED TO BICYCLE COMMUTING REIMBURSEMENT.–
    “(i) QUALIFIED BICYCLE COMMUTING REIMBURSEMENT.–The term ‘qualified bicycle commuting reimbursement’ means, with respect to any calendar year, any employer reimbursement during the 15-month period beginning with the first day of such calendar year for reasonable expenses incurred by the employee during such calendar year for the purchase of a bicycle and bicycle improvements, repair, and storage, if such bicycle is regularly used for travel between the employee’s residence and place of employment.
    “(ii) APPLICABLE ANNUAL LIMITATION.–The term ‘applicable annual limitation’ means, with respect to any employee for any calendar year, the product of $20 multiplied by the number of qualified bicycle commuting months during such year.
    “(iii) QUALIFIED BICYCLE COMMUTING MONTH.–The term ‘qualified bicycle commuting month’ means, with respect to any employee, any month during which such employee–
    “(I) regularly uses the bicycle for a substantial portion of the travel between the employee’s residence and place of employment, and
    “(II) does not receive any benefit described in subparagraph (A), (B), or (C) of paragraph (1).”.
    (d) CONSTRUCTIVE RECEIPT OF BENEFIT.–Paragraph (4) of section 132(f) is amended by inserting “(other than a qualified bicycle commuting reimbursement)” after “qualified transportation fringe”.
    (e) EFFECTIVE DATE.–The amendments made by this section shall apply to taxable years beginning after December 31, 2008.

    (this is largely retyped since I couldn’t get adobe reader to let me copy anything beyond about the first paragraph. Any typos are almost surely mine)

  • Commuter Jim

    You are missing out on a nuance of this legislation. Note that this is a modification to “Section 132(f)” of the IRS tax code. The $20 per month is TAX-FREE. The general savings would be 30% to 40% ($6 to $8 per month) so the total annual savings would be between $312 and $336 each year!

    There are plenty of firms who currently administer Section 132(f) for Commutation expenses, such as WageWorks and ADP. This does not have to be an administrative burden to employees, and these pre-tax benefits should be offered by all firms, large and small.

  • I do not understand how this benefit would actually be implemented. Rep Blumenauer’s web site and fact sheet compare this benefit to the benefits for parking and transit–but those benefits are simply untaxed deductions. My employer allowed me to purchase transit passes with pre-tax income. This measure sounds like the employer will be able to give bike commuters $20/month and then claim that as a tax credit. What if your company is not profitable and does not pay tax? Or is this money that could be reimbursed? Who would cut that check to my company? How would they apply for it?

  • Commuter Jim, I think you answered my question. The benefit is “tax free” to the employee, not the company. So what they really mean by “give” is that a portion of your salary can be given tax free in the same way the transit passes and 401k contributions work. My employer could use WageWorks to give me $20, then reduce my paycheck by $20 before taking out taxes. Instead of the money going to the MBTA for a T-pass, it would go directly to me. Is that correct??? So we need Wageworks to add this feature, then get the employer to utilize it.

  • Alden Wilner

    The electric motor I bought for my (ancient) Schwinn this June — the cheapest electric motor on electricrider’s web page — still set me back $500.
    I wonder if I could amortize…? 🙂

  • Alec Jarvis

    Dave Atkins, I think you’ve got it. Basically, if your employer reimburses you up to $240 annually and does not give you a transit pass, qualified parking, or other transportation, then you can exclude the up to $240 from your gross income. It’s tax-free to the employer in the sense that they can deduct that just like any other wage expense, but more importantly it’s taken right off the top from taxable income as far as the taxpayer is concerned. But, it’s all contingent upon an employer reimbursing for bicycle expenses.

  • Ian Turner

    Presumably the commuter check, eTRAC, TransitChek, etc., vouchers and cards will now simply become valid for commuter bicycling expenses, without employers having to change anything about their benefit programs.

  • I was so excited about this as the silver lining to a big fiasco, but now I see that it does few commuters any good. My employer (along with many others) won’t do bus passes (even where the employee would pay for the bus passes as pre-tax income, the way we pay part of our health insurance premium with pre-tax income), so I doubt it would go for this.

    It doesn’t look like the commuter can get the $240 as non-taxed income (as with Health Savings Accounts).

  • tnSSer

    WOW! Another government funded “benefit” that is to hard for the average joe to understand or has to many hoops to actualy be worth an all the jumping. Great job!

  • Natasha

    I am part of the benefits and services team in my company and I am looking for tips/assistance for how to implement this credit. I ride my bike to work 3-4 times per week and am trying to nail down the nuances of a program like this. If its raining/snowing for a week straight can you expect people to ride to work? if someone is out on vacation for the month, do you remove them for that month? Even if it is ‘only’ $20 employers are given the task of establishing guidelines and keeping it fair, who monitors actual days/month? is it an honor system?

    any suggestions are very welcome!

    Natasha

  • Ian Turner

    The easiest way to handle this is to treat it the same as any other §321 benefit. You can require employees to submit receipts documenting their commuting expenses (which can be for transit, carpool, vanpool, parking, or bicycling) and then reimburse accordingly with pre-tax dollars. Note that there are (different) statutory limits for each category of expense. The benefit can be free to employees as a fringe benefit, or you can make an adjusting payroll deduction. In the latter case, simply inform your payroll processing company (paychex/ADP/etc) that the deduction is taken under 26 USC 132 (f).

    If you provide a transitchek/etrac/commuter check benefit, note that the bicycling benefit is made under the same law. You should also note that the IRS allows payment by reimbursement instead of by voucher as long as there is no fee-free voucher available (there is not in New York), so if you want you can save some fees by processing reimbursements yourself.

    Finally, standard disclaimer: These remarks do not constitute tax advise. I am not a tax accountant or tax lawyer and have no formal training in tax law. In any case, tax law varies between jurisdictions. You should seek council from a tax professional licensed to practice in your area before taking any action. These remarks are provided free and as-is and neither I nor the Open Planning Project shall carry any liability arising therefrom.

  • Safe BikeCommuter

    Employee bike commuting is not realistic unless the city is bicycle friendly. The problem is not necessarily antagonistic drivers, but city governments and police departments that resist bicycles on roadways. A key factor is left turn lanes and traffic signals that accommodate bicycles. California has state law AB-1581 that requires traffic-activated signal to detect bicycles upon first placement or replacement. The city of Newport Beach in Southern California is an example of being impossible for bicycle commutes because of non-detecting signals and motorcycle police officers preying on bicyclists for vehicle citations. Not being contiguous to a major freeway and heavily residential, Newport Beach is light traffic except for weekend beach visitors. Newport Beach has a financial center that is remote from the beach and ideal for employee bicycle commuting in the year-around warm weather. I regularly bike from the financial center to the main post office, and have never experienced a traffic signal that detects bicycles with the embedded-wire loops and quadruples. Newport Beach has a left-turn lane used by hundreds of bicyclists to a Back Bay nature preserve. I received a left-turn citation in a situation with no traffic and a green through light. The motorcycle officer David Darling apparently was experienced in using bicyclists for pseudo-vehicle citations. He never told me what the violation was, and his opening question was whether I owned a car. The question seemed inappropriate to a middle-aged person. He asked me for my car license plate number, and reprimanded me for not being able to remember the letters and numbers. He was decisively fabricating a car violation from a bicycle. Afterwards, I contacted the commanding officers and they supported his tactics. Despite California having AB-1581 for bicycle signal detection, the Traffic Sergeant claimed that the Newport Beach Police Department (NBPD) was enforcing state laws. I received a letter from the Traffic Lieutenant advocating that bicyclists should test the signal and use the pedestrian button and walk. I have tried his recommendation, but found it to be unsafe to dismount in the left lane and scurry across the road to the pedestrian button at the sidewalk. Also, drivers were making gestures of disapproval as to why I was holding up the traffic by running with the bicycle to the crosswalk from the left turn lane, and then walking back again in the crosswalk. Most discouraging was the fact that Principal Civil Engineer Tony Brine and Traffic Engineer Technician replied to my email that the traffic signal had been set back not to detect bicycles. Officer David Darling and other motorcycle officers chase bicycles to exploit the signal’s lack of detection. My traffic citation was coded as a vehicle instead of a bicycle, and cost a $346 fine. The clerk at the municipal court told me that they get several such citations each day. Based on that statement, NBPD’s collaboration with traffic engineers targets a significant percentage of bicyclists and is possibly generating about $500,000 revenue annually. The revenue might justify an overstaffed and under-productive police department, but is a disservice to the community. Newport Beach Mayor Ed Selich was not amenable to reviewing bicycle usage for the community. The $346 pseudo-vehicle fine plus insurance increases create a $1,000 cost that negates the economic benefits of employee bicycle commuting. And the non-detecting signals are detrimental to safe bicycling.

  • strikecity

    Here in Minnesota, bicycles have all the rights and responsibilities of any other vehicle on the roadway. During my motorcycle license training, I learned that a motorist may deem a turn signal to be defective if the intersection lights have passed through one complete sequence without a turn opportunity. Once a turn arrow has been deemed defective, you may ignore the arrow and turn left when the through traffic light is green and oncoming traffic permits.

  • vandermeyj

    As I am having to research this “benefit” there is a cost for employers. Employee payroll packages may or may not be able to handle an additional pretax deduction. some training, mistakes involved etc. In most cases but not too big of deal.

    Hopefully the law will work that if the employer ignores the deduction, the employee can still take the decution on their personal tax return. but I am not seeing that detailed of an explanation in my googling.

    Signed, occasional commute by bike to work Employee in charge of accounting for a small business who has more important things to worry about

  • interesting article

  • Thomas Costilla

    Practical piece , For what it’s worth , if someone needs a CH-205 , my assistant edited a template form here http://goo.gl/VnXSdL

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