Bicycle Commuter Benefit
Bicycle Commuter Benefit
Employers may provide a reimbursement of up to $20 per month tax-free to employees
The Bicycle Commuter Act provides a tax-benefited reimbursement for the expenses of bicycle commuting.
Any employer, if they chose to do so, may provide a reimbursement of up to $20 per month for reasonable expenses incurred by the employee in conjunction with their commute to work by bike. The reimbursement is a fringe benefit paid by the employer the employee does not get taxed on the amount of the reimbursement.
Be aware, though, that the bicycle commuter benefit is more restrictive than other qualified transportation fringe benefits in several ways:
- An employee cannot choose to reimburse themselves with pre-tax income, the reimbursement must be paid by the employer; and
- An employee cannot receive both the transit and bicycle fringe benefits in the same month.
On January 1, 2009, the bicycle commuting reimbursement was added to the list of qualified transportation fringe benefits covered in section 132 (f) of the Internal Revenue Service Code (26 U.S.C. sec. 132(f)).
SEC. 211. TRANSPORTATION FRINGE BENEFIT TO BICYCLE COMMUTERS.
(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.
On January 1, 2009, the qualified bicycle commuting reimbursement was added to the list of qualified transportation fringe benefits covered in section 132 (f) of the Internal Revenue Service Code.
The Bicycle Commuter Act was in front of Congress for seven years, and finally passed as an inclusion to the larger Renewable Energy Tax Credit legislation in 2008. The original intent of the provision was to provide a simple, equitable solution to put cyclists on the same footing as people who receive qualified transportation benefits (QTF) for taking transit or driving (or parking, actually) their cars to and from work. It was intended that the bike commuting benefit would be treated the same as the other QTFs.
The total anticipated cost of the provision, estimated by the Joint Committee on Taxation, is a very modest $1 million per year, as compared to the $4.5 billion annual cost of parking and transit benefits.
As a rule, the qualified transportation fringe benefit can only be provided by employers to employees. Common law employees and officers of corporations are eligible (the law does not include non-discrimination requirements for the benefit). Sole proprietors, partners, independent contractors and two-percent shareholders of S corporations are not eligible for this transportation fringe benefit.
The intent of this provision is to help defray some of those fixed costs such as; the purchase of a decent commuter bicycle; bike lock; helmet; bike parking facilities; shower facilities; and general maintenance. The real costs associated with bike commuting are much less than commuting by car but those bike commuters should be able to have help with those costs. Employers might not think this is a huge benefit to them but giving people a little financial incentive is another step in the right direction to build morale.
At this time costs associated with bike share are not reimbursable. A 2013 letter from the IRS expressed the opinion that costs associated with bike share are not costs associated with "the purchase of a bicycle and bicycle improvements, repair, and storage" which are reimbursable under the bicycle commuter benefit. The League has worked with representatives in Congress on how to fix this issue and make bike share costs eligible under either the transit commuter benefit or the bicycle commuter benefit. While that work continues, bike share is not eligible at this time.
A qualified bicycle commuting reimbursement, means any employer, if they chose to do so, may provide a reimbursement of up to $20 per month for reasonable expenses incurred by the employee in conjunction with their commute to work by bike.
Please note however, that unlike the other qualified transportation fringe benefits, a qualified bicycle commuting reimbursement benefit cannot be funded through employee pre-tax income, nor can an employee receive both the transit and bicycle QTF in the same month. Click here to read in-depth analysis of the bike commuter provision limitations.
(Legal disclaimer: The analysis provided was written by League legal intern Gregory T. Simmons. It was not performed by a lawyer and is provided only for our readers' interest and information, not as legal advice. Employers, before making any decisions affecting your tax liability, you should consult your accountant or tax legal adviser).
A qualified bicycle commuting month is any month in which an employee: (I) regularly uses a bicycle for a substantial portion of the travel between his residence and his place of employment, and (II) does not receive any other qualified transportation benefit for such as transit, and parking.
The League developed reimbursement cards to make implementing the Bicycle Commuter Act in your workplace as easy as possible. Simply sign the pledge on the card that states you commuted to work by bike for at least three days per week, and then staple your receipts to the card. Download all 12 months (pdf):
Companies are finding their own unique ways of implementing this program. At the League we developed a set of monthly reimbursement cards to help track employee commutes. Meredith Corporation developed a set of guidelines to help employees understand the reimbursement program, click here to view their guidelines. To help track employee miles Meredith uses a tracking log.
Intuit has an excellent FAQ on the bicycle commuter benefits for HR employees: https://payroll.intuit.com/support/kb/2000941.html
First, talk to your employer and tell them you want this benefit. If there are other bike commuters in your office, tell them to speak up too!
Many employers contract with a Commuter Benefit Provider to coordinate their commuter programs, so have your benefit coordinator call the provider to request enrollment in the bike benefit program. As of April 2009, we have not confirmed any providers who offer the bike benefit other than Commuter Benefit Solutions. But other providers are looking to initiate this program, so call and tell them you want it!
If your employer already contracts with a Commuter Benefit Provider, ask the person who coordinates these benefits to request enrollment in the bike benefit program. If the provider doesn't offer it, find out when they plan to implement it- it's law as of January 1, 2009.
If your employer prefers to manage the qualified transportation fringe benefits (qtfb) in-house, rather than with a Commuter Benefit Provider, the employer can implement a cash reimbursement program.
The key point to consider in setting up a cash reimbursement program is that there is a mechanism for the employee to certify that they will commute to work by bike a substantial portion of the month. For example that could mean three days a week for a full time employee and less for a part-time employee. Employers can best determine what works best for their organization. Additionally, employee keeps their receipts for covered expenses and turns them into the employer for reimbursement up to $20 a month or $240 per year.
The Commuter Benefit is real and in effect- it is the same as all other pre-tax benefits for transit and parking currently available by the IRS. (See Section 2, "Transportation (Commuting) Benefits" of the IRS Publication 15-B (2009), Employer's Tax Guide to Fringe Benefits)
If your company elects to offer this benefit, you can receive up to $20 a month for each month you commute primarily by bike, so long as you don't accept any of the other transit benefit.