New Bicycle Commuting Benefit

Effective January 1, 2009

TECHNICAL EXPLANATION OF H.R. 7060, THE “RENEWABLE ENERGY AND JOB CREATION TAX ACT OF 2008,” AS SCHEDULED FOR CONSIDERATION BY THE HOUSE OF REPRESENTATIVES ON SEPTEMBER 25, 2008  JCX-75-08  

6. Extension of transportation fringe benefit to bicycle commuters (sec. 126 of the bill and sec. 132(f) of the Code) Present Law

Qualified transportation fringe benefits provided by an employer are excluded from an employee's gross income.42 Qualified transportation fringe benefits include parking, transit passes, and vanpool benefits. In addition, no amount is includible in income of an employee merely because the employer offers the employee a choice between cash and qualified transportation fringe benefits. Up to $220 (for 2008) per month of employer-provided parking is excludable from income. Up to $115 (for 2008) per month of employer-provided transit and vanpool benefits are excludable from gross income. These amounts are indexed annually for inflation, rounded to the nearest multiple of $5. Under present law, qualified transportation fringe benefits include a cash reimbursement by an employer to an employee. However, in the case of transit passes, a cash reimbursement is considered a qualified transportation fringe benefit only if a voucher or similar item which may be exchanged only for a transit pass is not readily available for direct distribution by the employer to the employee. Explanation of ProvisionThe provision adds a qualified bicycle commuting reimbursement fringe benefit as a qualified transportation fringe benefit. A qualified bicycle commuting reimbursement fringe benefit means, with respect to a calendar year, any employer reimbursement during the 15-month period beginning with the first day of such calendar year of an employee for reasonable expenses incurred by the employee during the calendar year for the purchase and repair of a bicycle, bicycle improvements, and bicycle storage, provided that the bicycle is regularly used for travel between the employee’s residence and place of employment. The maximum amount that can be excluded from an employee’s gross income for a calendar year on account of a bicycle commuting reimbursement fringe benefit is the applicable annual limitation for the employee for that calendar year. The applicable annual limitation for an employee for a calendar year is equal to the product of $20 multiplied by the number of the employee’s qualified bicycle commuting months for the year. The $20 amount is not indexed for inflation. A qualified bicycle commuting month means with respect to an employee any month for which the employee does not receive any other qualified transportation fringe benefit and during which the employee regularly uses a bicycle for a substantial portion of travel between the employee’s residence and place of employment. Thus, no amount is credited towards an employee’s applicable annual limitation for any month in which an employee’s usage of a bicycle is infrequent or constitutes an insubstantial portion of the employee’s commute. A bicycle commuting reimbursement fringe benefit cannot be funded by an electivesalary contribution on the part of an employee. Effective DateThe provision is effective for taxable years beginning after December 31, 2008. Visit http://www.house.gov/jct/x-75-08.pdf for more details.