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

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

by Larry Lagarde

Here's some great news for any potential US bicycle commuter: Congress has finally passed the Bicycle Commuter Act!

Championed by Congressman Blumenauer, the League of American Bicyclists and regular folks like you and I, this is the act that makes tax incentives available to those that commute by bicycle.

The act took 7 years to get pass. Frankly, President Bush still has to sign it but don't worry - he will. And do you know why?

Is it because Bush likes riding mountain bikes on his Texas ranch?
No (he does though).

Is it because Bush and his trusty DOT secretary (Mary Peters) view bikes as a viable transportation alternative?
Yeah right - NO.

The reason Bush will sign the act is because it became one of the provisions of the $700 billion financial markets bailout that Bush has said must take place. Even with sweeteners like the Bicycle Commuter Act included, the bailout just squeeked past Congress. With the whole world screaming for Washington to avert an international economic meltdown, there's no way Bush won't sign.

Labels: Bicycle-Commuter-Act

by Larry Lagarde

If you'd like to see more people commuting by bike, this would be a good time to tell your US senator.

Sometime in the next 48 hours, the US Senate is supposed to vote on the Energy Improvement and Extension Act of 2008. Essentially, the act extends tax credits for alternate energy projects such as solar, wind and geothermal; however, it also contains a provision to provide bicycle commuters with a reimbursement for expenses related to bicycle commuting (such as buying a bike, bike improvements, repairs, storage, etc.).

The Senate is expected to vote on this legislation either today (Thursday, September 18) or tomorrow (Friday, the 19th). With Republican senators working to vote this act down (the oil lobby doesn't want it to pass PLUS the Republicans don't want the Democrats to have a green victory) it is critical that senators hear that their constituents want this act to pass. So be part of the solution - make a difference by contacting your US senator TODAY.

The League of American Cyclists have a convenient form on their website that will help you contact your senator. To use their form, visit the League's "Action Alert" regarding The Energy Improvement And Extension Act Of 2008. Here's the link:

http://capwiz.com/lab/issues/alert/?alertid=11939026

Labels: Bicycle-Commuter-Act, commuter-tax-credit

Here is a copy of the letter I wrote this morning to the House Committee on Ways and Means in support of The Bicycle Commuter Act. If you'd like to support the Act, feel free to use my letter to create your own. For your reference, I've also included additional resources about the Act below.

+++++++++++++++ Letter Body Below +++++++++++++++
Honored Members of Congress,

H.R. 807 and S. 2636 are Bills that can make an immediate and positive impact on Americans and the U.S. economy.

Bicycles are an existing mode of transportation that consume no fossil fuels, generate no pollution and provide proven health benefits to their users. By enacting the Bicycle Commuter Act (H.R. 807 and S. 2636), commuters that use bicycles to get to work will receive tax credits to defray the costs of commuting by bike.

Voting the Bicycle Commuter Act into law will spur more commuters to bicycle to/from work, saving commuters on energy costs, reducing dependence on foreign oil, reducing obesity, improving cardiovascular and mental health, reducing traffic congestion, improving air quality and improving productivity in the workplace.

Given the Act's financial impact on federal revenue has been estimated by the Joint Committee on Taxation to be under $78M over 5 years, the benefits produced by voting into law H.R. 807 and S. 2636 will far outweigh the costs.

I encourage all Members of Congress to vote for this pro American legislation.

Respectfully,

Lawrence Lagarde III
Bridge City, Louisiana

+++++++++++++++ Letter Body Above +++++++++++++++

Here are resources with more info about The Bicycle Commuter Act:
- League of American Bicyclists Fact Sheet
- My explanation of the Act
- The Bicycle Commuter Act Bill itself

Larry

Labels: Bicycle-Commuter-Act

The League of American Bicyclists contacted me this morning to keep pressure on Congress regarding the Bicycle Commuter Act, a bill before Congress that encourages consumers to use a bicycle to get to/from work. The Act has 55 sponsors in Congress bit there's a chance the House Committee on Ways and Means will kill the bill if they sense minimal public support.

The Bicycle Commuter Act is worthy of support by bicyclists as well as anyone interested in environmental responsibility. Congress is allowing public comment on the bill but only through October 10th.

Supporting the Act is both easy and quick (it took me 7 minutes). Simply write a letter, save it in either Word or WordPerfect, fill in a short form, then attach the letter you wrote to the confirmation email from Congress.

To get started, you can submit a letter to the Committee only by going to...
waysandmeans.house.gov/submissions.aspx

To read the letter I sent to the House Committee on Ways and Means this morning regarding the Bicycle Commuter Act or for more reference material regarding the Bill, go to...
http://world-class-bike-trails.blogspot.com/2006/09/my-letter-supporting-bicycle-commuter.html.

By the way, here's the email I received from the League this morning:

Larry,

Because you are an active advocate for bicycling, the League of American Bicyclists wanted to alert you that Congressman Dave Camp, Chair of the Ways and Means subcommittee on revenue measures held a hearing this past Tuesday to allow Members to testify on Bills they submitted containing tax provisions. Congressman Earl Blumenauer (D-OR) testified in support of the Bicycle Commuter Act (H.R. 807 and S. 2636); to view his testimony, go to http://waysandmeans.house.gov/hearings.asp?formmode=view&id=5296.

Additionally, outside organizations also have the opportunity to submit written statements for the record. These statements will be accepted until October 10. Please visit http://capwiz.com/lab/issues/alert/?alertid=9056871&type=CU for instructions on how to submit comments supporting the Bicycle Commuter Act. To read the League of American Bicyclists’ fact sheet on the Bicycle Commuter Act, go to http://www.bikeleague.org/news/060606adv.php.

Thank you for everything you do for bicycling.

Sarah Stiles

League of American Bicyclists

Larry

Labels: Bicycle-Commuter-Act