Answers About The New Bike Commuter Benefit Program

by Larry Lagarde

After reporting last month on the passage of the Bicycle Commuter Act, commuters began asking more about how this cycling incentive will work. For answers, I reached out to the Act's primary sponsor (Congressman Blumenauer) as well as to Accor Services, a commuter benefits management company that is helping employers to offer the benefit to bicycle commuters. Here are the questions I submitted and the answers I received...

... from Congressman Blumenauer's office (see paragraphs below for the answers):
1. Can the benefit be any amount up to $20?
2. What documentation does Section 132(f) require of the business?
3. What documentation does Section 132(f) require of the bicycle commuter?
4. Is the bicycle commuter fringe benefit subject to state income tax?
5. How does the bicycle commuter benefit affect Social Security?
6. How does the bicycle commuter benefit affect federal with holding?


Q1. Can the benefit be any amount up to $20?
A: The employer can offer any amount they want on the benefit, however, the employee can only receive up to $20/mth with the tax exclusion. So if your employer offers you $40 a month, you can collect all $40. However, you will be paying income taxes on $20 of that. If your employer wants to offer you only $15/mth then you would receive all of that $15 without paying taxes on it.

Q2. What documentation does Section 132(f) require of the business?
A: This will be decided by the IRS when they write the new tax code. However it is most likely that the IRS will require the same sort of documentation they require of employers now who offer any type of transit/parking fringe benefit. Most employers take those costs, and write them off as part of their business expenses. We expect the employer would add the cost to the same "cost of business" write-offs they take now. Again, this legislation only affects the tax status of the benefit for the employee, not the employer.

Q3. What documentation does Section 132(f) require of the bicycle commuter?
A: It will be up to the employer to decide what documentation the employee must offer to receive this benefit. In many cases, employers make employees sign a written agreement that states that they are commuting each day and adhere to the provisions of the statute. It might be that an employer makes administers the benefit through reimbursements that require receipts. As the employer is absorbing the cost of offering the benefit, it us up to them to come up with their own internal implementation system.

Q4. Is the bicycle commuter fringe benefit subject to state income tax?
A: This would vary from state to state on whether state governments tax transportation fringe benefits. We don't know where every state stands on that issue, but the bicycle commuter benefit would receive the same tax treatment as other transportation fringe benefits (i.e. parking, transit, and vanpooling benefits).

Q5. How does the bicycle commuter benefit affect Social Security?
A: We don't believe the bike benefit affects Social Security at all, except that there will be a small amount of forgone taxes to the U.S. government.

Q6. How does the bicycle commuter benefit affect federal with holding?
A: For the employee, they will not have taxes withheld on the bike benefit, up to $20 a month. IF they receive more than $20, than the difference would be subject to the same federal withholdings as the rest of your salary.

... from Accor Services (see paragraphs below for the answers):
1. What is Accor doing to help employers offer or manage bicycle benefits?
2. What exactly is a Commuter Check for Bicycling?
3. Can commuters receive vouchers for cycling as well as for other non-cycling commuting expenses?
4. Who pays for the Commuter Check service?
5. Why would an employer purchase commuter checks?
6. When will the Commuter Check for Bicycling program start?
7. Can monthly Bicycling vouchers be combined to make a larger purchase?

Q1. What is Accor doing to help employers offer or manage bicycle benefits?
A: Accor is offering a Commuter Check for Bicycling program.

Q2. What exactly is a Commuter Check?
A: Commuter Checks are primarily vouchers that are redeemable for transit costs associated with Section 132(f) of the IRS federal tax code - transit passes, tickets and tokens as well as vanpool fares, commuter parking expenses and (now) commuter bicycle expenses.

Q3. Can commuters receive vouchers for cycling as well as for other non-cycling commuting expenses?
A: According to the Bicycle Commuter Act and the tax code, a commuter cannot receive the bicycling benefit and a benefit for using mass transit, etc. in the same month; however, it would be possible to receive a voucher for use with mass transit one month and a voucher for bicycling expenses the following month.

Q4. Who pays for the Commuter Check service?
A: The employer.

Q5. Why would an employer purchase Commuter Checks for Bicycling?
A: Commuter Check for Bicycling is a ready product that makes it easy for employers to offer and administer a new, eco friendly, fringe benefit to employees. As a result, the program can improve employer-employee relations while helping employees to exercise and reduce pollution. Ultimately, both the employer and the employees save money in the form of lower health related costs and lower federal payroll/income taxes.

Q6. When will the Commuter Check for Bicycling program start?
A: The voucher program is expected to begin when the law takes affect on January 1, 2009.

Q7. Can Bicycling vouchers be combined to make a larger purchase?
A: Bicycle commuters can use up to 13 consecutive months of their Commuter Check for Bicycling vouchers to make a larger purchase. Additionally, bicycle commuters can use their vouchers as partial payment on an allowed purchase.

Labels: Bicycle-Commuter-Act