Yesterday, the Senate passed their version of the Bailout Bill. One item contained in the bill which caught my eye was a change to Code section 132(f) which will cause an almost immediate revision to our Qualified Transportation plan. As a bicycle commuter for over 30 years, I appreciate this tax credit. As a pension geek, I am really wondering why the Senate felt that qualified bicycle commuting reimbursements were needed to stabilize the nation’s financial system.
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
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10 responses so far ↓
1 a-man // Oct 3, 2008 at 1:05 pm
It’s unclear since the provision amends existing law - does anyone know how this benefit would work? Does an employer elect to provide this benefit? Does the employee? Any guidance would be appreciated.
2 Cj // Oct 3, 2008 at 2:07 pm
Finally!!! It’s about time that those of us who have been making an environmental difference see a little return…
3 JES // Oct 3, 2008 at 2:37 pm
How would one prove that a cyclist has commuted at any given point?
I ride almost every day all year round. There’s no concrete evidence of it.
And this leaves out the self-employed, as usual.
4 j. mork // Oct 3, 2008 at 3:21 pm
Wow, $240 pre-tax for a year. In a 30% tax bracket, what, that saves you $80. Exciting :/
5 S. Donovan // Oct 3, 2008 at 10:18 pm
$80 is about the cost of my bike. Not bad!
6 Mark // Oct 5, 2008 at 7:27 pm
From what I understand, your company has to give you a fringe benefit for commuting by bike so that they can turn around and not have to pay any taxes on that part of your salary that goes to pay for your reimbursement.
As to why this was added? It was a sweetener to get the congressmen and senators from Oregon on board with the bail out bill.
7 Jon Webb // Oct 6, 2008 at 2:39 pm
The bike commuter tax credit was kicking around on Capitol Hill for a while. I think it had been added to the Renewable Energy bill they stuck in the bailout bill along with every other tax break that was “ready to go.” That’s why it’s in there.
It will work like the transit checks employers can give to subsidize employees use of public transportation. It’s a benefit from the employer, not from the IRS to the employee. So I don’t think it counts against your taxable income. On the other hand, it depends on your employer being willing to set the system up, and that may be too much trouble for a small employer.
There’s probably money to be made by local bicycling groups helping employers take advantage of this.
8 Cameron // Oct 8, 2008 at 11:01 am
This is a tax credit not a tax deduction. That means you get the full $240 off of you taxes owed. A tax deduction would take $240 off of your taxable income effectively giving you an $80 deduction in a 30% tax bracket.
-Hope this helps
9 Larry // Oct 8, 2008 at 2:55 pm
The Bicycle Commuter Act attached to the bailout package has been floating around Congress for 7 years. It had one purpose - to correct a disparity that allowed a tax credit to motor vehicle commuters but not to bicycle commuters.
Given the high cost of healthcare, I’m glad this 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 bicycle. In fact, we all stand to gain because this will mean fewer drivers, lower fuel consumption and less pollution.
10 John V // Oct 9, 2008 at 11:27 am
j. mork, I read this not as a pre-tax dollars type benefit, like the out-of-pocket health care spending account benefit, but a direct dollar-for-dollar reimbursement the employer can then deduct, also dollar-for-dollar, from its tax bill, so your annualized savings would be $240, not $80.
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