by Larry Lagarde

Shortly after passage of the Bicycle Commuter Act, grousing began about the Act being pork because it was part of the $700 billion Emergency Economic Stabilization Act of 2008 a.k.a. the bailout package (a reader even suggested the bike Act was another example why there should be a line item veto).

Though there's a great deal of disappointment with government and the bailout in general, the commuter tax credit embodied by the Bicycle Commuter Act is a good thing and here's why.

The Bicycle Commuter Act had one purpose - to correct a disparity in Section 132(f) of the IRS tax codes. The disparity was that the code allowed a tax credit to commuters that get to/from work via their personal motor vehicle, mass transit or van pooling; yet, offered no tax credit to bicycle commuters.

Due to the passage of the Bicycle Commuter Act, effective January 1, 2009, employees who regularly commute to work by bicycle can be reimbursed at a maximum rate of $20 per month for costs associated with commuting by bike. Allowable expenses include a bicycle purchase, bike improvements, repairs, and bike parking/storage. The reimbursements are to be made through the employer and employers have several choices regarding how to make the reimbursements. For example, employees can be reimbursed based on relevant receipts, may sign up for regular monthly payments or can work out a voucher system with their employer.

If you're wondering how the bicycle tax credit will prevent tax cheaters from abusing the credit, the IRS code will only allow a tax credit for one form of commuting. Since the reimbursements for bicycle commuting are far smaller than for other commuters ($215/mth credit for motor vehicle drivers and $110/mth credit for mass transit or van poolers vs $20/mth for cyclists), it would be silly for a car pooler, transit rider or auto driver to claim the bike commuting credit.

Given the high cost of healthcare, I'm glad that the bicycle commuter credit was included in the bailout bill. Business owners can now encourage their employees to bicycle to work, helping employees become healthier via their commute AND providing a tax break that will offset the cost of maintaining their commuter transportation (bicycle). In fact, we all stand to gain because this will mean fewer drivers, lower fuel consumption and less pollution.

And if we are heading into a depression, a lot of commuters may be using the bike tax credit ;-)

If anyone is interested, following is the exact text in the bailout package that pertains to the bicycle commuter tax credit.

Section 211 of the Senate Bailout bill states:

"(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 case 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."

pension protection act, ppa, senate, bailout, HR 1424, bicycle commuting, qualified transportation, 132(f), ERISA

Note:
Special thanks go to Hillary Barbour in Congressman Blumenauer's office for providing clarification on this tax credit for bicycle commuters.

Labels: Bicycle-Commuter-Act